hme10k2007.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
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þ
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31, 2007
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ____________________ to
____________________
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COMMISSION FILE
NUMBER: 1-13136
HOME PROPERTIES,
INC.
(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
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16-1455126
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(State
of incorporation)
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(I.R.S.
Employer Identification No.)
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850 Clinton Square,
Rochester, New York 14604
(Address
of principal executive offices)(Zip Code)
(585)
546-4900
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
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Name of each exchange on which
registered
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Common
Stock, $.01 par value
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New
York Stock Exchange
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Securities
registered pursuant to section 12(g) of the Act:
_____________________________
(Title of
class)
_____________________________
(Title of
class)
Indicate
by checkmark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Indicate
by checkmark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Indicate
by checkmark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Indicate
by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, non-accelerated filer or a smaller reporting company. See definition of
"large accelerated filer”, “accelerated filer" and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer þ
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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Smaller
reporting company ¨
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Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Act).
The
aggregate market value of the shares of common stock held by non-affiliates
(based on the closing sale price on the New York Stock Exchange) on June 30,
2007, was approximately $1,708,100,000.
As of
February 22, 2008, there were 32,619,928 shares of common stock, $.01 par value,
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Document
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Parts Into Which
Incorporated
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Proxy
Statement for the Annual Meeting of Stockholders to be held on May 1,
2008
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Part
III
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HOME PROPERTIES,
INC.
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Page
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PART
I.
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Business
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5
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Risk
Factors
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12
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Unresolved
Staff Comments
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18
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Properties
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18
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Legal
Proceedings
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24
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Submission
of Matters to a Vote of Security Holders
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24
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Executive
Officers
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24
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PART
II.
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Market
for the Registrant's Common Equity, Related Shareholder Matters, and
Issuer Purchases of Equity Securities
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26
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Selected
Financial Data
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29
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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32
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Quantitative
and Qualitative Disclosures About Market Risk
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52
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Financial
Statements and Supplementary Data
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53
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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53
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Controls
and Procedures
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53
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Other
Information
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54
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PART
III.
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Directors
and Executive Officers of the Registrant
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55
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Executive
Compensation
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58
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholders Matters
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58
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Certain
Relationships and Related Transactions, and Director
Independence
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58
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Principal
Accounting Fees and Services
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58
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PART
IV.
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Exhibits,
Financial Statement Schedules
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59
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This page
intentionally left blank.
PART
I
Forward-Looking
Statements
This
Form 10-K contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Our actual results could differ materially from those set forth
in each forward-looking statement. Certain factors that might cause
such a difference are discussed in this report, including in the section
entitled "Forward Looking Statements" on page 53 of this Form 10-K.
The
Company
Home
Properties, Inc. ("Home Properties" or the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") that owns, operates,
acquires, develops and rehabilitates apartment communities. The
Company's properties are regionally focused, primarily in selected Northeast,
Mid-Atlantic and Southeast Florida markets along the East Coast of the United
States. The Company was formed in November 1993 to continue and
expand the operations of Home Leasing Corporation ("Home
Leasing"). The Company completed an initial public offering of
5,408,000 shares of common stock (the "IPO") on August 4, 1994.
The
Company conducts its business through Home Properties, L.P. (the "Operating
Partnership"), a New York limited partnership and a management company – Home
Properties Resident Services, Inc. ("HPRS"), which is a Maryland
corporation. At December 31, 2007, the Company held 70.8% (71.4% at
December 31, 2006) of the limited partnership units in the Operating Partnership
("UPREIT Units"). Formerly, a portion of the Company’s business was
also conducted by Home Properties Management, Inc. (“HP Management”), also a
Maryland corporation, which was merged into HPRS on November 21,
2006.
Home
Properties, through its affiliates described above, as of December 31, 2007,
operated 125 communities with 38,646 apartment units. Of these, 37,496 units in
123 communities are owned outright (the "Owned Properties"), 868 units in one
community are managed and partially owned by the Company as general partner, and
282 units in one community are managed for other owners (collectively, the
"Managed Properties").
The Owned
Properties and the Managed Properties (collectively, the "Properties") are
concentrated in the following market areas:
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Apts.
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Apts.
Managed As
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Apts.
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Apt.
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Market Area
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Owned
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General Partner
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Fee Managed
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Totals
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Suburban
Washington, D.C.
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8,988 |
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- |
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- |
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8,988 |
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Suburban
New York City
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8,535 |
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- |
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- |
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8,535 |
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Baltimore,
MD
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7,346 |
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- |
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282 |
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7,628 |
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Philadelphia,
PA
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6,452 |
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- |
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- |
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6,452 |
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Boston,
MA
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2,382 |
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- |
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- |
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2,382 |
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Chicago,
IL
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2,242 |
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- |
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- |
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2,242 |
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Southeast
Florida
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836 |
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- |
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- |
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836 |
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Portland,
ME
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715 |
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- |
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- |
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715 |
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Columbus,
OH
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- |
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868 |
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- |
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868 |
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Total
Number of Units
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37,496 |
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868 |
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282 |
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38,646 |
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Total
Number of Communities
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123 |
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1 |
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1 |
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125 |
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The
Company's mission is to maximize long-term shareholder value by acquiring,
repositioning, developing and managing market-rate apartment communities while
enhancing the quality of life for its residents and providing employees with
opportunities for growth and accomplishment. Our vision is to be a
prominent owner and manager of market-rate apartment communities, located in
selected high barrier, high growth, East Coast markets. The areas we
have targeted for growth are the Baltimore, Boston, New York City, Philadelphia,
Southeast Florida and
Washington,
D.C. regions. We expect to maintain or grow portfolios in markets
that profitably support our mission as economic
conditions permit.
The
Company's business strategies include: (i) aggressively managing and
improving its communities to achieve increased net operating income; (ii)
acquiring additional apartment communities with attractive returns at prices
that provide a positive spread over the Company's long-term cost of capital;
(iii) developing new apartment communities on raw land, on land adjacent to
existing owned communities, and where there are density opportunities to replace
existing garden apartments with mid- or high-rise structures; (iv) disposing of
properties that have reached their potential, are less efficient to operate, or
are located in markets where growth has slowed to a pace below the markets
targeted for acquisition; and (v) maintaining a strong and flexible capital
structure with cost-effective access to the capital markets.
Structure
The
Company was formed in November 1993 as a Maryland corporation and is the general
partner of the Operating Partnership. On December 31, 2007, it held a
70.8% partnership interest in the Operating Partnership comprised of: 1) a 1.0%
interest as sole general partner; and 2) a 69.8% limited partner interest
through its wholly owned subsidiary, Home Properties I, LLC, which owns 100% of
Home Properties Trust, which is the limited partner. The holders of
the remaining 29.2% of the UPREIT Units are certain individuals and entities who
received UPREIT Units as consideration for their interests in entities owning
apartment communities purchased by the Operating Partnership, including certain
officers and directors of the Company.
The
Operating Partnership is a New York limited partnership formed in December
1993. Holders of UPREIT Units in the Operating Partnership may redeem
an UPREIT Unit for one share of the Company's common stock or cash equal to the
fair market value at the time of the redemption, at the option of the
Company. Management expects that it will continue to utilize UPREIT
Units as a form of consideration for a portion of its acquisition properties
when it is economical to do so.
HPRS is
and HP Management was, prior to its merger into HPRS in November 2006, a wholly
owned subsidiary of the Company, and as a result, the accompanying
consolidated financial statements include the accounts of both
companies. HPRS is and HP Management was, a taxable REIT subsidiary
under the Tax Relief Extension Act of 1999. HP Management was formed
in January 1994 and HPRS was formed in December 1995. Both companies
managed, for a fee, certain of the commercial, residential and development
activities of the Company and provided construction, development and
redevelopment services for the Company. After the Company’s sale and
transfers of its affordable management properties and commercial management
contracts, the amount of activity in HPRS and HP Management was minimal in 2006
and HP Management therefore was merged into HPRS.
In
September 1997, Home Properties Trust ("QRS") was formed as a Maryland real
estate trust and as a qualified REIT subsidiary. The QRS is wholly
owned by Home Properties I, LLC which is owned 100% by the
Company. The QRS is a limited partner of the Operating
Partnership and holds all of the Company’s interest in the Operating
Partnership, except for the 1% held directly by the Company as sole general
partner.
The
Company currently has approximately 1,200 employees and its executive offices
are located at 850 Clinton Square, Rochester, New York
14604. Its telephone number is (585) 546-4900.
Operating
Strategies
The
Company will continue to focus on enhancing investment returns
by: (i) developing new apartments and acquiring apartment
communities and repositioning those apartment communities for long-term growth
at prices that provide a positive spread over the Company's long-term cost of
capital; (ii) recycling assets by disposing of properties in low growth markets
and those that have reached their potential or are less efficient to operate due
to size or remote location; (iii) balancing its decentralized property
management philosophy with the efficiencies of centralized support functions and
accountability including rent optimization and volume purchasing; (iv) enhancing
the quality of living for the Company's residents by improving the service and
physical amenities available at each community every year; (v) adopting new
technology so that the time and cost spent on administration can be minimized
while the time spent attracting and serving residents can be maximized; (vi)
continuing to utilize its
written
"Pledge" of customer satisfaction that is the foundation on which the Company
has built its brand recognition; and (vii) focusing on reducing expenses while
constantly improving the level of service to residents.
The
Company has a strategy of acquiring and repositioning mature C to B- apartment
properties. Since its 1994 IPO, the Company has acquired and
repositioned 195 communities, containing more than 53,000 units. The
rehabilitation and revitalization process requires a minimum 9% return on
repositioning investments which is often greatly exceeded. Extensive
experience and expertise in repositioning has helped the Company build
significant internal design and construction management
skills. The complete initial repositioning of a community can
take place over a five to seven year period. The comprehensive
process typically begins with improvements in landscaping, signage and common
areas. This increases curb appeal and marketability of the
property. Deferred maintenance is corrected which can include new
HVAC systems, roofs, new balconies and windows. At many properties,
community centers and swimming pools are added or upgraded. Apartment
interiors are renovated when residents move out with the most significant
investments made in upgrading kitchens and baths. Complete remodeling
of dated kitchens and bathrooms typically include new appliances, flooring,
counters, cabinets, lighting, tile, fixtures, sinks, bathtubs and
toilets. It may include the removal of kitchen walls to open up the
living area. Where feasible, in-unit washers and dryers are
added. Repositioning efforts upgrade properties that were C to
B- level when acquired to the B to B+ level, which over time significantly
increases the property’s rental income, net operating income and market
value.
Acquisition and Sale
Strategies
The
Company's strategy is to grow primarily through acquisitions in the suburbs of
major metropolitan markets that have significant barriers to new construction,
limited new apartment supply, easy access to the Company's headquarters and
enough apartments available for acquisition to achieve a critical
mass. Targeted markets also possess other characteristics, including
acquisition opportunities below replacement costs, a mature housing stock, high
average single-family home prices, a favorable supply/demand relationship,
stable or moderate job growth, reduced vulnerability to economic downturns and
large prime renter populations including immigrants, Echo Boomers (the children
of the Baby Boomers born from 1977 to 1994) and seniors (> 55 years
old). The Company currently expects that its growth will be focused
primarily within suburban sub-markets of selected metropolitan areas within the
Northeast, Mid-Atlantic and Southeast Florida regions of the United States where
it has already established a presence. The largest metropolitan areas
the Company will focus on include Baltimore, Boston, New York City,
Philadelphia, Southeast Florida, and Washington, D.C. The Company may
expand into new markets that possess the characteristics described
above. Continued geographic specialization is expected to have a
greater impact on operating efficiencies versus widespread accumulation of
properties. The Company will continue to pursue the acquisition of
individual properties as well as multi-property portfolios. It may
also consider strategic investments in other apartment companies, as well as
strategic alliances, such as joint ventures. The Company has
anticipated closing on acquisitions of $150 million in its budget for
2008.
During
2007, the Company acquired five communities with a total of 1,541 units for an
aggregate consideration of $161.5 million, or an average of approximately
$104,800 per apartment unit. The weighted average expected first year
capitalization rate for the acquired communities was
5.9%. Capitalization rate ("cap rate") is defined as the rate of
interest used to convert the first year expected net operating income ("NOI")
less a 3.0% management fee into a single present value. NOI is
defined by the Company as rental income and property other income less operating
and maintenance expenses. The acquisitions were concentrated in
Boston, Baltimore and New Jersey.
During
2007, the Company completed the sale of five communities with a total of 1,084
units for an aggregate consideration of $129.5 million, at a weighted average
expected first-year cap rate of 5.9%. The Company reinvested the net
proceeds from those properties of approximately $119.2 million, which were
expected to produce a weighted average unleveraged internal rate of return
("IRR") of 5.1%, with the purchase of properties expected to produce an
unleveraged IRR of 8.1%. IRR is defined as the discount rate at which
the present value of the future cash flows of the investment is equal to the
cost of the investment. Two of the properties sold were originally
acquired through transactions where the sellers received UPREIT Units as
consideration in order to provide them with the opportunity to defer tax
obligations. We refer to these transactions as "UPREIT
transactions." Generally, in UPREIT transactions, the Company has
made certain commitments to the sellers regarding the Company's sale of the
property. As a result, a tax deferred Section 1031 exchange was used
to continue to defer taxable gains of the UPREIT investor on one of the
properties. On the other property, a tax indemnity payment of
approximately $195,000 will be made to the UPREIT investor.
The
Company has targeted additional communities for sale and will continue to
evaluate the sale of other of its communities. Typically, a property
will be targeted for sale if management is of the opinion that it has reached
its potential or if it is located in a slower growth market or is less efficient
to operate. A certain number of the properties may originally have
been acquired through UPREIT transactions. Therefore, those sales
will have to be matched with suitable acquisitions using a tax deferred
exchange. The Company has anticipated closing on sales of $180
million in its budget for 2008.
Financing and Capital
Strategies
The
Company intends to adhere to the following financing policies: (i)
maintaining a ratio of debt-to-total market capitalization (total debt of the
Company as a percentage of the market value of outstanding diluted common stock
(including the common stock equivalents of the UPREIT Units) plus total debt) of
approximately 55% or less; (ii) utilizing primarily fixed rate debt; (iii)
varying debt maturities to avoid significant exposure to interest rate changes
upon refinancing; and (iv) maintaining a line of credit so that it can respond
quickly to acquisition opportunities.
On
December 31, 2007, the Company's debt was approximately $2.2 billion and the
debt-to-total market capitalization ratio was 51.3% based on the year-end
closing price of the Company's common stock of $44.85. The weighted
average interest rate on the Company's mortgage debt as of December 31,
2007 was 5.7% and the weighted average maturity was approximately six and
one-half years. Debt maturities are staggered, ranging from January
2008, through January 2042. As of December 31, 2007, the Company
had an unsecured line of credit facility from M&T Bank of $140
million. This facility is available for acquisition and other
corporate purposes and bears an interest rate at 0.75% over the one-month LIBOR
rate. As of December 31, 2007, the one-month LIBOR rate was 4.6% and
there was $2.5 million outstanding on the line of credit.
Management
expects to continue to fund a portion of its continued growth by taking
advantage of its UPREIT structure and using UPREIT Units as currency in
acquisition transactions. During 2007 and 2006, the Company issued
$36.3 million and $20.4 million worth of UPREIT Units as partial consideration
for three and two acquired properties, respectively. It is difficult
to predict the level of demand from sellers for this type of
transaction. In periods when the Company’s stock price is trading at
a discount to estimated net asset value (“NAV”), it is unlikely that management
would engage in UPREIT transactions.
During
periods when the Company's shares are trading at a premium to its estimate of
NAV, it is unlikely that management would engage in share
repurchases. In such circumstances, it is more likely that management
would pursue issuing equity in order to raise capital to be used to pay down
existing indebtedness. This should be neutral to both earnings per
share and NAV, increase the level of unencumbered assets and better position the
Company to fund future acquisition and development pipeline needs.
In 1997,
the Company's Board of Directors approved a stock repurchase program under which
the Company can repurchase shares of its outstanding common stock and UPREIT
Units. Shares or units may be repurchased through the open market or
in privately-negotiated transactions. The Company's strategy is to
opportunistically repurchase shares at a discount to its underlying NAV, thereby
continuing to build value for long-term shareholders. At December 31,
2005, there was approval remaining to purchase 3,220,195
shares. During 2006, the Company repurchased 2,613,747 shares of its
outstanding common stock at a cost of $142.5 million at a weighted average price
of $54.53 per share. On October 27, 2006, the Board of Directors
approved an additional 2,000,000-share increase in the stock repurchase
program. During 2007, the Company repurchased 1,243,700 shares of its
outstanding common stock at a cost of $58.3 million at a weighted average price
of $46.86 per share, resulting in a remaining authorization level of 1,362,748
shares as of December 31, 2007. At the present time, the 2008
guidance assumes $50 million of stock buy-back.
Competition
The
Company’s properties are primarily located in developed areas where there are
other multifamily properties which directly compete for
residents. There is also competition from single family homes and
condominiums for sale or rent. The competitive environment may have a
detrimental effect on the Company’s ability to lease apartments at existing and
at newly developed properties, as well as on rental rates.
In addition, the Company
competes with other real estate investors in seeking property for acquisition
and development. These competitors include pension and investment
funds, insurance companies, private investors, local owners and developers, and
other apartment REITs. This competition could increase prices for
properties that the Company would like to purchase and impact the
Company’s ability to achieve its long-term growth targets.
The
Company believes, however, that it is well-positioned to compete effectively for
both residents and properties as a result of its:
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focus
on service and resident satisfaction, as evidenced by both The Home
Properties Pledge, which provides a money-back service guarantee and lease
flexibility, and by its resident turnover ratio which is consistently
below the industry average;
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ability
to issue UPREIT Units in purchase transactions, which provides sellers
with the opportunity to defer taxes;
and
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unique
repositioning strategy that differentiates the Company from its
competitors.
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Market
Environment
The
markets in which Home Properties operates could be characterized as stable, with
moderate levels of job growth. For 2007, there is a trend of slightly
stronger job growth in the Company's markets of 1.0% compared to 0.9% for the
country. Although, this trend is an improvement over the 2006 figures
of 1.2% for the Company’s markets compared to 1.7% for the entire country, the
percentage of job growth declining year over year for both the Company’s markets
and country might suggest a slight weakening of the stable economic climate that
has been enjoyed since 2004.
The
information on the Market Demographics and Multifamily Supply and Demand tables
on Pages 10 and 11 were compiled by the Company from the sources indicated on
the tables. The methods used include estimates and, while the Company
feels that the estimates are reasonable, there can be no assurance that the
estimates are accurate. There can also be no assurance that the
historical information included on the table will be consistent with
future trends.
New
construction in the Company's markets is low relative to the existing
multifamily housing stock and compared to other regions of the
country. In 2007, Home Properties' markets represented 27.7% of the
total estimated existing U.S. multifamily housing stock, but only 17.2% of the
country's estimated net new supply of multifamily
housing units.
An
analysis of future multifamily supply compared to projected multifamily demand
can indicate whether a particular market is tightening, softening or in
equilibrium. The fourth to last column in the Multifamily Supply and
Demand table on Page 11 reflects current estimated net new multifamily supply as
a percentage of new multifamily demand for the Company's markets and the United
States. In 2007, net new multifamily supply as a percent of net new
multifamily demand in Home Properties' markets was approximately 57%, compared
to a national average of 111%. The Home Properties' markets seem to
be tightening on a measurement of supply/demand equilibrium, while the country
as a whole experienced a measurable swing towards oversupply. In
2006, these same percentages were 65% and 68% for the Company and the country,
respectively.
The third
to the last column in the Multifamily Supply and Demand table on Page 11 shows
the estimated net new multifamily supply as a percent of existing multifamily
housing stock. In the Company's markets, net new supply only
represents 0.4% of the existing multifamily housing stock. This
compares to the national average net new multifamily supply estimates at 0.7% of
the multifamily housing stock.
Market
Demographics
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December
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December
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2007
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Job
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Job
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Multifamily
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Growth
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Growth
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2007
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Units
as a %
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2007
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%
of
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2007
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Trailing
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Trailing
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December
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Median
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of
Total
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Multifamily
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Owned
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Number
of
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12
Months
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12
Months
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Unemployment
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Home
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Housing
Units
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|
|
Housing
|
|
MSA
Market Area
|
|
Units
|
|
|
Households
|
|
|
%
Change
|
|
|
Actual
|
|
|
Rate
|
|
|
Value
|
|
|
Stock
(4)
|
|
|
Stock
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern
VA/DC
|
|
|
24.0 |
% |
|
|
2,029,059 |
|
|
|
1.4 |
% |
|
|
40,900 |
|
|
|
3.0 |
% |
|
$ |
378,887 |
|
|
|
30.9 |
% |
|
|
657,303 |
|
Suburban
New York City (1)
|
|
|
22.8 |
% |
|
|
6,870,593 |
|
|
|
0.9 |
% |
|
|
79,000 |
|
|
|
4.4 |
% |
|
|
411,109 |
|
|
|
45.1 |
% |
|
|
3,303,932 |
|
Baltimore,
MD
|
|
|
19.5 |
% |
|
|
1,036,400 |
|
|
|
1.2 |
% |
|
|
16,300 |
|
|
|
3.6 |
% |
|
|
256,863 |
|
|
|
22.0 |
% |
|
|
243,276 |
|
Eastern
PA (2)
|
|
|
17.2 |
% |
|
|
2,535,546 |
|
|
|
1.0 |
% |
|
|
33,300 |
|
|
|
4.2 |
% |
|
|
196,483 |
|
|
|
19.2 |
% |
|
|
520,315 |
|
Boston,
MA
|
|
|
6.4 |
% |
|
|
1,705,968 |
|
|
|
0.9 |
% |
|
|
22,200 |
|
|
|
3.7 |
% |
|
|
388,254 |
|
|
|
33.1 |
% |
|
|
594,932 |
|
Chicago,
IL
|
|
|
6.0 |
% |
|
|
3,431,388 |
|
|
|
0.8 |
% |
|
|
36,800 |
|
|
|
4.9 |
% |
|
|
240,459 |
|
|
|
32.3 |
% |
|
|
1,188,332 |
|
Southeast
Florida (3)
|
|
|
2.2 |
% |
|
|
2,079,180 |
|
|
|
1.0 |
% |
|
|
24,800 |
|
|
|
4.1 |
% |
|
|
257,969 |
|
|
|
41.9 |
% |
|
|
993,203 |
|
Portland,
ME
|
|
|
1.9 |
% |
|
|
214,831 |
|
|
|
0.2 |
% |
|
|
300 |
|
|
|
3.7 |
% |
|
|
221,146 |
|
|
|
17.1 |
% |
|
|
43,550 |
|
Home
Properties Markets
|
|
|
100.0 |
% |
|
|
19,902,965 |
|
|
|
1.0 |
% |
|
|
253,600 |
|
|
|
3.8 |
% |
|
$ |
317,543 |
|
|
|
35.3 |
% |
|
|
7,544,843 |
|
United
States
|
|
|
|
|
|
|
113,668,003 |
|
|
|
0.9 |
% |
|
|
1,226,000 |
|
|
|
4.8 |
% |
|
$ |
172,914 |
|
|
|
21.6 |
% |
|
|
27,285,490 |
|
(1) Suburban
New York City is defined for this report as New York-Northern New Jersey-Long
Island, NY-NJ-PA MSA.
(2) Eastern
Pennsylvania is defined for this report as Philadelphia-Camden-Wilmington,
PA-NJ-DE-MD MSA & Allentown-Bethlehem-Easton PA-NJ MSA.
(3) Southeast
Florida is defined for this report as Miami-Fort Lauderdale-Miami Beach, FL
MSA.
(4) Based
on Claritas 2007 estimates calculated from the 2000 U.S. Census
figures.
(5) 2007 Multifamily Housing Stock
is from Claritas estimates based on the 2000 U.S. Census.
Sources: Bureau
of Labor Statistics (BLS); Claritas, Inc.; US Census
Bureau - Manufacturing & Construction Div.
Data
collected is data available as of February 6, 2008 and in some cases may be
preliminary.
BLS is
the principal fact-finding agency for the Federal Government in the broad field
of labor economics and statistics.
Claritas,
Inc. is a leading provider of precision marketing solutions and related
products/services.
U.S.
Census Bureau's parent federal agency is the U.S. Dept. of Commerce, which
promotes American business and trade.
|
Multifamily
Supply and Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Net
New
|
|
|
Net
New
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
2007
|
|
|
Multifamily
|
|
|
Multifamily
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
Estimated
|
|
|
2007
|
|
|
New
|
|
|
Supply
as a
|
|
|
Supply
as a
|
|
|
|
|
|
Expected
|
|
|
|
New
|
|
|
2007
|
|
|
Net
New
|
|
|
Multifamily
|
|
|
%
of New
|
|
|
%
of
|
|
|
Expected
|
|
|
Excess
|
|
|
|
Supply
of
|
|
|
Multifamily
|
|
|
Multifamily
|
|
|
Household
|
|
|
Multifamily
|
|
|
Multifamily
|
|
|
Excess
|
|
|
Revenue
|
|
MSA
Market Area
|
|
Multifamily(6)
|
|
|
Obsolescence
(7)
|
|
|
Supply
(8)
|
|
|
Demand
(9)
|
|
|
Demand
|
|
|
Stock
|
|
|
Demand
(10)
|
|
|
Growth
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern
VA/DC
|
|
|
7,605 |
|
|
|
3,287 |
|
|
|
4,318 |
|
|
|
8,430 |
|
|
|
51.2 |
% |
|
|
0.7 |
% |
|
|
4,112 |
|
|
|
0.6 |
% |
Suburban
New York City (1)
|
|
|
32,973 |
|
|
|
16,520 |
|
|
|
16,453 |
|
|
|
23,765 |
|
|
|
69.2 |
% |
|
|
0.5 |
% |
|
|
7,312 |
|
|
|
0.2 |
% |
Baltimore,
MD
|
|
|
1,398 |
|
|
|
1,216 |
|
|
|
182 |
|
|
|
2,392 |
|
|
|
7.6 |
% |
|
|
0.1 |
% |
|
|
2,210 |
|
|
|
0.9 |
% |
Eastern
PA (2)
|
|
|
3,669 |
|
|
|
2,602 |
|
|
|
1,067 |
|
|
|
4,265 |
|
|
|
25.0 |
% |
|
|
0.2 |
% |
|
|
3,198 |
|
|
|
0.6 |
% |
Boston,
MA
|
|
|
4,808 |
|
|
|
2,975 |
|
|
|
1,833 |
|
|
|
4,901 |
|
|
|
37.4 |
% |
|
|
0.3 |
% |
|
|
3,068 |
|
|
|
0.5 |
% |
Chicago,
IL
|
|
|
13,481 |
|
|
|
5,942 |
|
|
|
7,539 |
|
|
|
7,928 |
|
|
|
95.1 |
% |
|
|
0.6 |
% |
|
|
389 |
|
|
|
0.0 |
% |
Southeast
Florida
|
|
|
6,963 |
|
|
|
4,966 |
|
|
|
1,997 |
|
|
|
6,931 |
|
|
|
28.8 |
% |
|
|
0.2 |
% |
|
|
4,934 |
|
|
|
0.5 |
% |
Portland,
ME
|
|
|
407 |
|
|
|
218 |
|
|
|
189 |
|
|
|
34 |
|
|
|
555.9 |
% |
|
|
0.4 |
% |
|
|
(155 |
) |
|
|
(0.4 |
%) |
Home
Properties Markets
|
|
|
71,304 |
|
|
|
37,726 |
|
|
|
33,578 |
|
|
|
58,646 |
|
|
|
57.3 |
% |
|
|
0.4 |
% |
|
|
25,068 |
|
|
|
0.3 |
% |
United
States
|
|
|
331,989 |
|
|
|
136,427 |
|
|
|
195,562 |
|
|
|
176,632 |
|
|
|
110.7 |
% |
|
|
0.7 |
% |
|
|
(18,930 |
) |
|
|
(0.1 |
%) |
(1)-(5) see footnotes prior
page
(6)
|
Estimated 2007 New Supply of
Multifamily = Multifamily permits (2007 figures U.S. Census Bureau,
Mfg. & Constr. Div., 5+ permits only) adjusted by the average % of
permits resulting in a construction start (estimated at
95%).
|
(7)
|
Estimated 2007 Multifamily
Obsolescence = 0.5% of Estimated 2007 Multifamily Housing
Stock.
|
(8)
|
Estimated 2007 Net New Multifamily
Supply = Estimated 2007 New Supply of Multifamily - Estimated 2007
Multifamily Obsolescence.
|
(9)
|
Estimated 2007 New Multifamily Household
Demand = Trailing 12 month job growth (Nonfarm, not seasonally
adjusted payroll employment figures) (12/31/2006-12/31/2007) multiplied by
the expected % of new household formations resulting from new jobs (66.7%)
and the % of multifamily households in each market (based on Claritas
estimates).
|
(10)
|
Expected Excess Demand =
Estimated 2007 New Multifamily Household Demand - Estimated 2007 Net New
Multifamily Supply.
|
(11)
|
Expected Excess Revenue
Growth = Expected Excess Demand divided by 2007 Multifamily Housing
Stock. This percentage is expected to reflect the relative
impact that changes in the supply and demand for multifamily housing units
will have on occupancy rates and/or rental rates in each market, beyond
the impact caused by broader economic factors, such as inflation and
interest rates.
|
Environmental
Matters
As a
current or prior owner, operator and developer of real estate, the Company is
subject to various federal, state and local environmental laws, regulations and
ordinances and also could be liable to third parties as a result of
environmental contamination or noncompliance at its properties. See
the discussion under the caption, “We may incur costs due to environmental
contamination or non-compliance” in Item 1A, Risk Factors, for information
concerning the potential effect of environmental regulations on the Company’s
operations.
Available
Information
The
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and other reports required by Sections 13(a) and 15(d) of
the Securities Exchange Act of 1934, as amended, are electronically filed with
the Securities and Exchange Commission (“SEC”). The public may read
and copy any materials the Company files with the SEC at the SEC’s Public
Reference Room at 100 F Street NE, Washington, DC 20549-2521. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
Public Reference Room. The SEC maintains a Web site at www.sec.gov
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
Company Web
Site
The
Company maintains an Internet Web site at www.homeproperties.com. The
Company provides free of charge access to its reports filed with the SEC, and
any amendments thereto, through this Web site. These reports are
available as soon as reasonably practicable after the reports are filed
electronically with the SEC and are found under "Investors/Financials/SEC
Filings." In addition, paper copies of annual and periodic reports
filed with the SEC may be obtained at no charge by contacting the Corporate
Secretary, Home Properties, Inc., 850 Clinton Square, Rochester, New York
14604. The address is also included within the SEC filings or under
"Investors/Shareholder Services/Contact Information," on the Company's Web
site.
Current
copies of the Company’s Code of Business Conduct and Ethics, Code of Ethics for
Senior Financial Officers, Corporate Governance Guidelines and Charters for the
Audit, Compensation, Corporate Governance/Nominating and Real Estate Investment
Committees of the Board of Directors are also available on the Company’s Web
site under the heading “Investors/Corporate
Governance/Highlights.” Copies of the these documents are also
available at no charge upon request addressed to the Corporate Secretary at Home
Properties, Inc., 850 Clinton Square, Rochester, New
York 14604. The address is also included on the Company’s Web
site under “Investors/Shareholder Services/Contact Information”.
The
reference to our Web site does not incorporate by reference the information
contained in the Web site and such information should not be considered a part
of this report.
As used
in this section, references to "we" or "us" or "our" refer to the Company, the
Operating Partnership, and HPRS.
The
following risks apply to Home Properties, the Operating Partnership, and HPRS,
in addition to other risks and factors set forth elsewhere in this Form
10-K.
Real Estate Investment
Risks
We
are subject to risks that are part of owning real estate.
Real
property investments are subject to varying degrees of risk. If our
communities do not generate revenues sufficient to meet operating expenses,
including debt service and capital expenditures, our cash flow and ability to
make distributions to our stockholders will be adversely affected. A
multifamily apartment community’s revenues and value may be adversely affected
by general economic conditions; local economic conditions; local real estate
considerations (such as oversupply of or reduced demand for apartments); the
perception by prospective residents of the safety, convenience and
attractiveness of the communities or neighborhoods in which they are located and
the
quality
of local schools and other amenities; and increased operating costs (including
real estate taxes and utilities). Certain significant fixed expenses are
generally not reduced when circumstances cause a reduction in income from the
investment.
We
depend on rental income for cash flow to pay expenses and make
distributions.
We are
dependent on rental income to pay operating expenses and to generate cash to
enable us to make distributions to our stockholders. If we are unable
to attract and retain residents or if our residents are unable, due to an
adverse change in the economic condition of the region or otherwise, to pay
their rental obligations, our ability to make expected distributions will be
adversely affected. In addition, the weather and other factors
outside of our control can result in an increase in the operating expenses for
which we are responsible.
Acquisitions may
fail to meet expectations.
We intend
to continue to acquire apartment communities. However, there are
risks that acquisitions will fail to meet our expectations. Our
estimates of future income, expenses and the costs of improvements or
redevelopment that are necessary to allow us to market an acquired property as
originally intended may prove to be inaccurate.
Real
estate investments are relatively illiquid, and we may not be able to respond to
changing conditions quickly.
Real
estate investments are relatively illiquid and, therefore, we have limited
ability to adjust our portfolio quickly in response to changes in economic or
other conditions. In addition, the prohibition in the Internal
Revenue Code (the “Code”) on REITs holding property for sale and related
regulations may affect our ability to sell properties without adversely
affecting distributions to stockholders. A significant number of our
Properties were acquired using UPREIT Units and are subject to certain
agreements which restrict our ability to sell such Properties in transactions
that would create current taxable income to the former owners.
Our
business is subject to competition.
We plan
to continue to acquire additional multifamily residential properties in the
Northeast, Mid-Atlantic and Southeast Florida regions of the United
States. There are a number of multifamily developers and other real
estate companies that compete with us in seeking properties for acquisition,
prospective residents and land for development. Most of our
Properties are in developed areas where there are other properties of the same
type. Competition from other properties may affect our ability to
attract and retain residents, to increase rental rates and to minimize expenses
of operation. Competition for the acquisition of properties could
increase prices for the types of properties we would like to pursue and
adversely affect our financial performance.
Repositioning
and development risks could affect our profitability.
A key
component of our strategy is to acquire properties and to reposition them for
long-term growth. In addition, we have developed and are in the
process of developing new apartment units. We plan to continue to
expand our development activities. Development projects generally
require various governmental and other approvals, which have no assurance of
being received. Our repositioning and development activities
generally entail certain risks, including the following:
|
·
|
funds
may be expended and management’s time devoted to projects that may not be
completed due to a variety of factors, including without limitation, the
inability to obtain necessary zoning or other
approvals;
|
|
·
|
construction
costs of a project may exceed original estimates, possibly making the
project economically unfeasible;
|
|
·
|
development
projects may be delayed due to delays in obtaining necessary zoning and
other approvals, adverse weather conditions, labor shortages, or other
unforeseen complications;
|
|
·
|
occupancy
rates and rents at a completed project may be less than anticipated;
and
|
|
·
|
the
operating expenses at a completed development may be higher than
anticipated.
|
These
risks may reduce the funds available for distribution to our
stockholders. Further, the repositioning and development of
properties is also subject to the general risks associated with real estate
investments.
Short-term
leases expose us to the effects of declining market conditions.
Virtually
all of the leases for our Properties are short-term leases (generally, one year
or less). Typically, our residents can leave after the end of a
one-year lease term. As a result, our rental revenues are impacted by
declines in market conditions more quickly than if our leases were for longer
terms.
A
significant uninsured property or liability loss could adversely affect us in a
material way.
The
Company carries comprehensive liability, fire, extended and rental loss
insurance for each of the Properties. There are however certain types
of extraordinary losses, such as losses for terrorism and natural catastrophes,
for which the Company may not have insurance coverage. If an
uninsured loss occurred, we could lose our investment in, and cash flow from,
the affected property, and could be required to repay any indebtedness secured
by that property and related taxes and other charges.
Changes
in applicable laws, or noncompliance with applicable laws, could adversely
affect our operations or expose us to liability.
We must
operate our Properties in compliance with numerous federal, state and local laws
and regulations, including landlord tenant laws and other laws generally
applicable to business operations. Noncompliance with laws could
expose us to liability.
Compliance
with changes in: (i) laws increasing the potential liability for
environmental conditions existing on Properties or the restrictions on
discharges or other conditions; (ii) rent control or rent stabilization laws; or
(iii) other governmental rules and regulations or enforcement policies affecting
the use and operation of our communities, including changes to building codes
and fire and life-safety codes, may result in lower revenue growth or
significant unanticipated expenditures.
We
may incur costs and increased expenses to repair property damage resulting from
inclement weather.
Particularly
in the Northeast and Chicago, we are exposed to risks associated with inclement
winter weather, including increased costs for the removal of snow and
ice. In addition, in Southeast Florida, we have exposure to severe
storms which could also increase the need for maintenance and repair of our
communities in that region.
We
may incur costs due to environmental contamination or
non-compliance.
Under
various federal, state and local environmental laws, regulations and ordinances,
we may be required, regardless of knowledge or responsibility, to investigate
and remediate the effects of hazardous or toxic substances at our Properties and
may be held liable under these laws or common law to a governmental entity or to
third parties for property, personal injury or natural resources damages and for
investigation and remediation costs incurred as a result of the
contamination. These damages and costs may be
substantial. The presence of such substances, or the failure to
properly remediate the contamination, may adversely affect our ability to borrow
against, sell or rent the affected property.
The
development, construction and operation of our communities are subject to
regulations and permitting under various federal, state and local laws,
regulations and ordinances, which regulate matters including wetlands
protection, storm water runoff and wastewater
discharge. Noncompliance with such laws and regulations may subject
us to fines and penalties. We do not currently anticipate that we
will incur any material liabilities as a result of noncompliance with these
laws.
Certain
federal, state and local laws, regulations and ordinances govern the removal,
encapsulation or disturbance of asbestos containing materials (“ACMs”) when such
materials are in poor condition or in the event of renovation or demolition of a
building. These laws and the common law may impose liability for
release of ACMs and may allow third parties to seek recovery from owners or
operators of real properties for personal injury associated with exposure to
ACMs. ACMs are present at several of our communities. We
implement an operations and maintenance program at each of the communities at
which ACMs are detected. We do not currently anticipate that we will
incur any material liabilities as a result of the presence of ACMs at our
communities.
We are
aware that some of our communities have lead paint and have implemented an
operations and maintenance program at each of those communities. We
do not currently anticipate that we will incur any material liabilities as a
result of the presence of lead paint at our communities.
All of
the Owned Properties and all of the communities that we are currently developing
have been subjected to at least a Phase I or similar environmental assessment,
which generally does not involve invasive techniques such as soil or ground
water sampling. These assessments, together with subsurface
assessments conducted on some Properties, have not revealed, and we are not
otherwise aware of, any environmental conditions that we believe would have a
material adverse effect on our business, assets, financial condition or results
of operation. There is no assurance that Phase I assessments would
reveal all environmental liabilities or that environmental conditions not known
to the Company may exist now or in the future which would result in liability to
the Company for remediation or fines, either under existing laws and regulations
or future changes to such requirements.
Mold
growth may occur when excessive moisture accumulates in buildings or on building
materials, particularly if the moisture problem remains undiscovered or is not
addressed over a period of time. Although the occurrence of mold at
multifamily and other structures, and the need to remediate such mold, is not a
new phenomenon, there has been increased awareness in recent years that certain
molds may in some instances lead to adverse health effects, including allergic
or other reactions. There have been only limited cases of mold
identified to us. We do not currently anticipate that we will incur
any material liabilities relating to mold.
Additionally,
we occasionally have been involved in managing, leasing and operating various
properties for third parties. Consequently, we may be considered to
have been an operator of such properties and, therefore, potentially liable for
removal or remediation costs or other potential costs which could relate to
hazardous or toxic substances. We are not aware of any material
environmental liabilities with respect to properties managed by us for such
third parties.
Financing
and compliance requirements could limit our income and the ability to raise
rents.
As a
requirement relating to some of our financing, or, in some instances, relating
to zoning or other municipal approvals, we have committed to make some of the
apartments in a community available to households whose income does not exceed
certain thresholds and/or to limit rent increases. As of December 31,
2007, approximately 9% of our apartment units were under some form of such
limitations. These commitments typically expire after a period of
time, and may limit our ability to raise rents aggressively and, in consequence,
can also limit increases in the value of the communities subject to these
restrictions.
Real Estate Financing
Risks
There
are general risks related to debt.
We are
subject to the customary risks associated with debt financing including the
potential inability to refinance existing mortgage indebtedness upon maturity on
favorable terms. If a property is mortgaged to secure payment of
indebtedness and we are unable to meet its debt service obligations, the
property could be foreclosed upon. This could adversely affect our
cash flow and, consequently, the amount available for distributions to
stockholders. As of December 31, 2007, approximately 99% of our
indebtedness was at fixed rates. This limits exposure to changes in
interest rates. Prolonged interest rate increases, however, could
negatively affect our ability to make acquisitions and develop properties and
our ability to refinance existing borrowings at acceptable rates.
There
is no legal limit on the amount of debt we can incur.
The Board
of Directors has adopted a policy of limiting our indebtedness to approximately
55% of our total market capitalization (with the equity component of total
market capitalization based on the per share net asset value presented to our
Board of Directors at its most recent Board meeting), but our organizational
documents do not contain any limitation on the amount or percentage of
indebtedness we may incur. Accordingly, the Board of Directors could
alter or eliminate its current policy on borrowing. If this policy were changed,
we could become more highly leveraged, resulting in an increase in debt service
that could adversely affect our ability to make expected distributions to
stockholders and increase the risk of default on our
indebtedness. Our net asset value fluctuates based on a number of
factors. Our line of credit agreement limits the amount of
indebtedness we may incur.
We
may not be able to refinance our debt when it matures.
We are
subject to the risks normally associated with debt financing, including the risk
that our cash flow will be insufficient to meet the required payments of
principal and interest. Because a significant amount of the financing
is not fully self-amortizing, we anticipate that only a portion of the principal
of our indebtedness will be repaid prior to maturity. So, we will
need to refinance debt. Accordingly, there is a risk that we will not
be successful in refinancing existing indebtedness or that the terms of such
refinancing will not be as favorable as the terms of the existing
indebtedness. We aim to stagger our debt maturities with the goal of
minimizing the amount of debt which must be refinanced in any year.
Financing
may not be available and issuing equity could dilute our stockholders'
interests.
Our
ability to execute our business strategy depends on our access to an appropriate
blend of debt financing, including unsecured lines of credit and other forms of
secured and unsecured debt, and equity financing, including common and preferred
equity. Debt or equity financing may not be available in sufficient
amounts, or on favorable terms or at all. If we issue additional
equity securities to finance developments and acquisitions instead of incurring
debt, the interests of our existing stockholders could be diluted.
Federal Income Tax
Risks
There
is no assurance that we will continue to qualify as a REIT.
We
believe that we have been organized and have operated in such manner so as to
qualify as a REIT under the Internal Revenue Service Code, commencing with our
taxable year ended December 31, 1994. A REIT generally is not
taxed at the corporate level on income it currently distributes to its
shareholders as long as it distributes currently at least 90% of its taxable
income (excluding net capital gain). No assurance can be provided,
however, that we have qualified or will continue to qualify as a REIT or that
new legislation, Treasury Regulations, administrative interpretations or court
decisions will not significantly change the tax laws with respect to our
qualification as a REIT or the federal income tax consequences of such
qualification.
We
are required to make certain distributions to qualify as a REIT, and there is no
assurance that we will have the funds necessary to make the
distributions.
In order
to continue to qualify as a REIT, we currently are required each year to
distribute to our stockholders at least 90% of our taxable income (excluding net
capital gain). In addition, we will be subject to a 4% nondeductible
excise tax on the amount, if any, by which certain distributions made by us with
respect to the calendar year are less than the sum of 85% of our ordinary
income, 95% of our capital gain net income for that year, and any undistributed
taxable income from prior periods. We intend to make distributions to
our stockholders to comply with the 90% distribution requirement and to avoid
the nondeductible excise tax and will rely for this purpose on distributions
from the Operating Partnership. However, differences in timing
between taxable income and cash available for distribution could require us to
borrow funds or to issue additional equity to enable us to meet the 90%
distribution requirement (and, therefore, to maintain our REIT qualification)
and to avoid the nondeductible excise tax. The Operating Partnership
is required to pay (or reimburse us, as its general partner, for) certain taxes
and other liabilities and expenses that we incur, including any taxes that we
must pay in the event we were to fail to qualify as a REIT. In
addition, because we are unable to retain earnings (resulting from REIT
distribution requirements), we will generally be required to refinance debt that
matures with additional debt or equity. There can be no assurance
that any of these sources of funds, if available at all, would be available to
meet our distribution and tax obligations.
Our
failure to qualify as a REIT would have adverse consequences.
If we
fail to qualify as a REIT, we will be subject to federal income tax (including
any applicable alternative minimum tax) on our taxable income at regular
corporate rates. In addition, unless entitled to relief under certain
statutory provisions, we will be disqualified from treatment as a REIT for the
four taxable years following the year during which REIT qualification is
lost. The additional tax burden on us would significantly reduce the
cash available for distribution by us to our stockholders. Our
failure to qualify as a REIT could reduce materially the value of our common
stock and would cause all our distributions to be taxable as ordinary income to
the extent of
our
current and accumulated earnings and profits (although, subject to certain
limitations under the Code, corporate distributees may be eligible for the
dividends received deduction with respect to these distributions).
The
Operating Partnership intends to qualify as a partnership but there is no
guaranty that it will qualify.
We
believe that the Operating Partnership qualifies as a partnership for federal
income tax purposes. No assurance can be provided, however, that the
Internal Revenue Service (the “IRS”) will not challenge its status as a
partnership for federal income tax purposes, or that a court would not sustain
such a challenge. If the IRS were to be successful in treating the
Operating Partnership as an entity that is taxable as a corporation, we would
cease to qualify as a REIT because the value of our ownership interest in the
Operating Partnership would exceed 5% of our assets and because we would be
considered to hold more than 10% of the voting securities of another
corporation. Also, the imposition of a corporate tax on the Operating
Partnership would reduce significantly the amount of cash available for
distribution to its limited partners. Finally, the classification of
the Operating Partnership as a corporation would cause its limited partners to
recognize gain (upon the event that causes the Operating Partnership to be
classified as a corporation) at least equal to their “negative capital accounts”
(and possibly more, depending upon the circumstances).
Other
Risks
The
ability of our stockholders to effect a change of control is limited by certain
provisions of our Articles of Incorporation as well as by Maryland law and our
Executive Retention Plan.
Our
Articles of Amendment and Restatement of the Articles of Incorporation, as
amended (the “Articles of Incorporation”), authorize the Board of Directors to
issue up to a total of 80 million shares of common stock, 10 million shares
of excess stock and 10 million shares of preferred stock and to establish
the rights and preferences of any shares issued. Further, under the
Articles of Incorporation, the stockholders do not have cumulative voting
rights.
In order
for us to maintain our qualification as a REIT, not more than 50% in value of
our outstanding stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) at any time
during the last half of its taxable year. We have limited ownership
of the issued and outstanding shares of common stock by any single stockholder
to 8.0% of the aggregate value of our outstanding shares.
The
percentage ownership limit described above, the issuance of preferred stock in
the future and the absence of cumulative voting rights could have the effect
of: (i) delaying or preventing a change of control of us even if
a change in control were in the stockholders’ interest; (ii) deterring
tender offers for our common stock that may be beneficial to the stockholders;
or (iii) limiting the opportunity for stockholders to receive a premium for
their common stock that might otherwise exist if an investor attempted to
assemble a block of our common stock in excess of the percentage ownership limit
or otherwise to effect a change of control of us.
As a
Maryland corporation, we are subject to the provisions of the Maryland General
Corporation Law. Maryland law imposes restrictions on some business
combinations and requires compliance with statutory procedures before some
mergers and acquisitions may occur, which may delay or prevent offers to acquire
us or increase the difficulty of completing any offers, even if they are in our
stockholders’ best interests. In addition, other provisions of the
Maryland General Corporation Law permit the Board of Directors to make elections
and to take actions without stockholder approval (such as classifying our Board
such that the entire Board is not up for re-election annually) that, if made or
taken, could have the effect of discouraging or delaying a change in
control.
Also, to
assure that our management has appropriate incentives to focus on our business
and Properties in the face of a change of control situation, we have adopted an
executive retention plan which provides some key employees with salary, bonus
and some benefits continuation in the event of a change of control.
Potential
conflicts of interest could affect some directors' decisions.
Unlike
persons acquiring common stock, certain of our directors, who constitute less
than a majority of the Board of Directors, own a significant portion of their
interest in us through UPREIT Units. As a result of their status as
holders of UPREIT Units, those directors and other limited partners may have
interests that conflict with
stockholders
with respect to business decisions affecting us and the Operating
Partnership. In particular, those directors may suffer different or
more adverse tax consequences than us upon the sale or refinancing of some of
the Properties as a result of unrealized gain attributable to those
Properties. Thus, those directors and the stockholders may have
different objectives regarding the appropriate pricing and timing of any sale or
refinancing of Properties. In addition, those directors, as limited
partners of the Operating Partnership, have the right to approve certain
fundamental transactions such as the sale of all or substantially all of the
assets of the Operating Partnership, merger or consolidation or dissolution of
the Operating Partnership and certain amendments to the Operating Partnership
Agreement.
The
future sale of shares may negatively impact our stock price.
Sales of
substantial amounts of shares of common stock in the public market or the
perception that such sales might occur could adversely affect the market price
of the common stock. As of December 31, 2007, the Operating
Partnership has issued and outstanding approximately 13.4 million UPREIT Units
held by persons other than us or the Trust. The UPREIT Units may be
exchanged on a one-for-one basis for shares of Common Stock under certain
circumstances. In addition, Home Properties has granted options to
purchase shares of stock to certain directors, officers and employees of Home
Properties, of which, as of December 31, 2007, 2.7 million options remained
outstanding and unexercised.
None.
As of
December 31, 2007, the Owned Properties consisted of 123 multifamily residential
communities containing 37,496 apartment units. In 2007, Home
Properties acquired 1,541 apartment units in five communities for a total
purchase price of $161.5 million. Also in 2007, the Company sold
five communities with a total of 1,084 units for total consideration of $129.5
million.
The Owned
Properties are generally located in established markets in suburban
neighborhoods and are well maintained and well leased. Average
physical occupancy at the Owned Properties was 94.7% for
2007. Occupancy is defined as total possible rental income, net of
vacancy; as a percentage of total possible rental income. Total
possible rental income is determined by valuing occupied units at contract rates
and vacant units at market rents. The Owned Properties are typically
two- and three-story garden style apartment buildings in landscaped settings and
a majority are of brick or other masonry construction. The Company
believes that its strategic focus on appealing to middle income residents and
the quality of the services it provides to such residents results in lower
resident turnover. Average turnover at the Owned Properties was
approximately 41% for 2007, which is significantly below the national average of
approximately 60% for garden-style apartments.
Resident
leases are generally for a one year term. Security deposits equal to
one month's rent or less are generally required.
Certain
of the Owned Properties collateralize mortgage loans. See Schedule
III contained herein (pages 99 to 102).
The table
on the following pages illustrates certain of the important characteristics of
the Owned Properties as of December 31, 2007.
Communities Wholly Owned and
Managed by Home Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
|
(3) |
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
|
2007 |
|
|
|
2006 |
|
|
|
2007 |
|
|
|
2006 |
|
|
|
|
|
|
|
|
# |
|
Age |
|
|
|
Average |
|
|
% |
|
|
Average |
|
Average |
|
|
Avg.Mo. |
|
|
|
Avg.Mo. |
|
|
12/31/2007 |
|
|
|
Of |
|
In
|
|
Year |
|
Apt
Size |
|
Resident |
|
|
% |
|
|
|
% |
|
|
Rent
Rate |
|
Rent
Rate |
|
Total
Cost |
Regional
Area |
|
|
Apts
|
|
Years |
|
Acq/Dev |
|
(Sq
Ft) |
|
Turnover |
|
Occupancy |
|
Occupancy |
|
|
per
Apt. |
|
|
|
per
Apt. |
|
|
|
(000) |
|
|
Core Communities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FL-Southeast
|
The
Hamptons
|
|
|
668 |
|
|
|
18 |
|
2004
|
|
|
1,052 |
|
|
|
41 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
$ |
1,035 |
|
|
$ |
979 |
|
|
$ |
65,318 |
|
FL-Southeast
|
Vinings
at Hampton Village
|
|
|
168 |
|
|
|
18 |
|
2004
|
|
|
1,207 |
|
|
|
58 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,129 |
|
|
|
1,060 |
|
|
|
16,380 |
|
IL-Chicago
|
Blackhawk
Apartments
|
|
|
371 |
|
|
|
46 |
|
2000
|
|
|
793 |
|
|
|
36 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
862 |
|
|
|
845 |
|
|
|
23,860 |
|
IL-Chicago
|
Courtyards
Village
|
|
|
224 |
|
|
|
36 |
|
2001
|
|
|
674 |
|
|
|
46 |
% |
|
|
98 |
% |
|
|
97 |
% |
|
|
796 |
|
|
|
771 |
|
|
|
16,889 |
|
IL-Chicago
|
Cypress
Place
|
|
|
192 |
|
|
|
37 |
|
2000
|
|
|
852 |
|
|
|
34 |
% |
|
|
98 |
% |
|
|
96 |
% |
|
|
918 |
|
|
|
904 |
|
|
|
14,288 |
|
IL-Chicago
|
The
Colony
|
|
|
783 |
|
|
|
34 |
|
1999
|
|
|
704 |
|
|
|
33 |
% |
|
|
98 |
% |
|
|
96 |
% |
|
|
854 |
|
|
|
816 |
|
|
|
54,903 |
|
IL-Chicago
|
The
New Colonies
|
|
|
672 |
|
|
|
33 |
|
1998
|
|
|
657 |
|
|
|
45 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
711 |
|
|
|
701 |
|
|
|
34,583 |
|
MA-Boston
|
Gardencrest
Apartments
|
|
|
696 |
|
|
|
59 |
|
2002
|
|
|
847 |
|
|
|
35 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,419 |
|
|
|
1,380 |
|
|
|
108,671 |
|
MA-Boston
|
Stone
Ends Apartments
|
|
|
280 |
|
|
|
28 |
|
2003
|
|
|
815 |
|
|
|
46 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,228 |
|
|
|
1,212 |
|
|
|
37,547 |
|
MA-Boston
|
The
Village at Marshfield
|
|
|
276 |
|
|
|
35 |
|
2004
|
|
|
735 |
|
|
|
41 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,140 |
|
|
|
1,128 |
|
|
|
34,714 |
|
MD-Baltimore
|
Bonnie
Ridge Apartments
|
|
|
960 |
|
|
|
41 |
|
1999
|
|
|
998 |
|
|
|
37 |
% |
|
|
94 |
% |
|
|
93 |
% |
|
|
1,032 |
|
|
|
1,008 |
|
|
|
80,918 |
|
MD-Baltimore
|
Canterbury
Apartments
|
|
|
618 |
|
|
|
29 |
|
1999
|
|
|
934 |
|
|
|
41 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
904 |
|
|
|
869 |
|
|
|
37,255 |
|
MD-Baltimore
|
Country
Village Apartments
|
|
|
344 |
|
|
|
36 |
|
1998
|
|
|
776 |
|
|
|
52 |
% |
|
|
95 |
% |
|
|
93 |
% |
|
|
859 |
|
|
|
837 |
|
|
|
23,644 |
|
MD-Baltimore
|
Falcon
Crest Townhomes
|
|
|
396 |
|
|
|
38 |
|
1999
|
|
|
993 |
|
|
|
44 |
% |
|
|
92 |
% |
|
|
92 |
% |
|
|
961 |
|
|
|
929 |
|
|
|
23,399 |
|
MD-Baltimore
|
Gateway
Village Apartments
|
|
|
132 |
|
|
|
18 |
|
1999
|
|
|
963 |
|
|
|
33 |
% |
|
|
97 |
% |
|
|
93 |
% |
|
|
1,238 |
|
|
|
1,205 |
|
|
|
10,722 |
|
MD-Baltimore
|
Mill
Towne Village
|
|
|
384 |
|
|
|
34 |
|
2001
|
|
|
812 |
|
|
|
40 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
841 |
|
|
|
816 |
|
|
|
30,059 |
|
MD-Baltimore
|
Morningside
Heights Apartments
|
|
|
1,050 |
|
|
|
42 |
|
1998
|
|
|
864 |
|
|
|
39 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
852 |
|
|
|
830 |
|
|
|
63,716 |
|
MD-Baltimore
|
Owings
Run Apartments
|
|
|
504 |
|
|
|
12 |
|
1999
|
|
|
1,136 |
|
|
|
49 |
% |
|
|
95 |
% |
|
|
94 |
% |
|
|
1,143 |
|
|
|
1,080 |
|
|
|
45,219 |
|
MD-Baltimore
|
Ridgeview
at Wakefield Valley
|
|
|
204 |
|
|
|
19 |
|
2005
|
|
|
916 |
|
|
|
41 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,080 |
|
|
|
1,013 |
|
|
|
22,967 |
|
MD-Baltimore
|
Selford
Townhomes
|
|
|
102 |
|
|
|
20 |
|
1999
|
|
|
987 |
|
|
|
35 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,267 |
|
|
|
1,229 |
|
|
|
8,265 |
|
MD-Baltimore
|
Timbercroft
Townhomes
|
|
|
284 |
|
|
|
35 |
|
1999
|
|
|
998 |
|
|
|
17 |
% |
|
|
99 |
% |
|
|
99 |
% |
|
|
823 |
|
|
|
797 |
|
|
|
13,632 |
|
MD-Baltimore
|
Village
Square (MD)
|
|
|
370 |
|
|
|
39 |
|
1999
|
|
|
948 |
|
|
|
46 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,113 |
|
|
|
1,085 |
|
|
|
25,317 |
|
MD-Baltimore
|
Woodholme
Manor Apartments
|
|
|
177 |
|
|
|
38 |
|
2001
|
|
|
817 |
|
|
|
26 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
818 |
|
|
|
788 |
|
|
|
10,662 |
|
ME-Portland
|
Mill
Company Gardens
|
|
|
95 |
|
|
|
56 |
|
1998
|
|
|
542 |
|
|
|
54 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
773 |
|
|
|
758 |
|
|
|
3,450 |
|
ME-Portland
|
Redbank
Village Apartments
|
|
|
500 |
|
|
|
63 |
|
1998
|
|
|
735 |
|
|
|
42 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
822 |
|
|
|
805 |
|
|
|
26,469 |
|
NJ-Northern
|
Barrington
Gardens
|
|
|
148 |
|
|
|
34 |
|
2005
|
|
|
922 |
|
|
|
41 |
% |
|
|
95 |
% |
|
|
97 |
% |
|
|
957 |
|
|
|
853 |
|
|
|
10,783 |
|
NJ-Northern
|
Chatham
Hill Apartments
|
|
|
308 |
|
|
|
40 |
|
2004
|
|
|
944 |
|
|
|
33 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
1,639 |
|
|
|
1,574 |
|
|
|
57,350 |
|
NJ-Northern
|
East
Hill Gardens
|
|
|
33 |
|
|
|
49 |
|
1998
|
|
|
654 |
|
|
|
52 |
% |
|
|
94 |
% |
|
|
98 |
% |
|
|
1,498 |
|
|
|
1,441 |
|
|
|
3,192 |
|
NJ-Northern
|
Hackensack
Gardens
|
|
|
198 |
|
|
|
59 |
|
2005
|
|
|
636 |
|
|
|
21 |
% |
|
|
97 |
% |
|
|
98 |
% |
|
|
945 |
|
|
|
865 |
|
|
|
16,760 |
|
NJ-Northern
|
Lakeview
Apartments
|
|
|
106 |
|
|
|
58 |
|
1998
|
|
|
492 |
|
|
|
43 |
% |
|
|
96 |
% |
|
|
98 |
% |
|
|
1,312 |
|
|
|
1,247 |
|
|
|
8,779 |
|
NJ-Northern
|
Northwood
Apartments
|
|
|
134 |
|
|
|
42 |
|
2004
|
|
|
937 |
|
|
|
37 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
1,257 |
|
|
|
1,194 |
|
|
|
17,344 |
|
NJ-Northern
|
Oak
Manor Apartments
|
|
|
77 |
|
|
|
51 |
|
1998
|
|
|
918 |
|
|
|
52 |
% |
|
|
95 |
% |
|
|
98 |
% |
|
|
1,749 |
|
|
|
1,713 |
|
|
|
7,937 |
|
NJ-Northern
|
Pleasant
View Gardens
|
|
|
1,142 |
|
|
|
39 |
|
1998
|
|
|
746 |
|
|
|
38 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
1,125 |
|
|
|
1,060 |
|
|
|
79,296 |
|
NJ-Northern
|
Pleasure
Bay Apartments
|
|
|
270 |
|
|
|
36 |
|
1998
|
|
|
685 |
|
|
|
45 |
% |
|
|
93 |
% |
|
|
95 |
% |
|
|
1,078 |
|
|
|
1,054 |
|
|
|
16,493 |
|
NJ-Northern
|
Regency
Club Apartments
|
|
|
372 |
|
|
|
33 |
|
2004
|
|
|
941 |
|
|
|
48 |
% |
|
|
96 |
% |
|
|
93 |
% |
|
|
1,119 |
|
|
|
1,105 |
|
|
|
42,096 |
|
NJ-Northern
|
Royal
Gardens Apartments
|
|
|
550 |
|
|
|
39 |
|
1997
|
|
|
874 |
|
|
|
38 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
1,192 |
|
|
|
1,128 |
|
|
|
35,642 |
|
NJ-Northern
|
Wayne
Village
|
|
|
275 |
|
|
|
42 |
|
1998
|
|
|
760 |
|
|
|
44 |
% |
|
|
96 |
% |
|
|
97 |
% |
|
|
1,339 |
|
|
|
1,281 |
|
|
|
23,154 |
|
NJ-Northern
|
Windsor
Realty Company
|
|
|
67 |
|
|
|
54 |
|
1998
|
|
|
628 |
|
|
|
46 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
1,153 |
|
|
|
1,136 |
|
|
|
5,886 |
|
NY-Alb/Hudson
Valley
|
Carriage
Hill Apartments
|
|
|
140 |
|
|
|
34 |
|
1996
|
|
|
898 |
|
|
|
58 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,225 |
|
|
|
1,196 |
|
|
|
8,752 |
|
NY-Alb/Hudson
Valley
|
Lakeshore
Villa Apartments
|
|
|
152 |
|
|
|
32 |
|
1996
|
|
|
952 |
|
|
|
45 |
% |
|
|
96 |
% |
|
|
92 |
% |
|
|
1,042 |
|
|
|
1,056 |
|
|
|
9,647 |
|
NY-Alb/Hudson
Valley
|
Patricia
Apartments
|
|
|
100 |
|
|
|
33 |
|
1998
|
|
|
725 |
|
|
|
36 |
% |
|
|
97 |
% |
|
|
95 |
% |
|
|
1,411 |
|
|
|
1,376 |
|
|
|
8,170 |
|
NY-Alb/Hudson
Valley
|
Sherwood
Consolidation
|
|
|
224 |
|
|
|
38 |
|
2002
|
|
|
831 |
|
|
|
32 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
1,241 |
|
|
|
1,189 |
|
|
|
19,973 |
|
NY-Alb/Hudson
Valley
|
Sunset
Garden Apartments
|
|
|
217 |
|
|
|
36 |
|
1996
|
|
|
840 |
|
|
|
42 |
% |
|
|
97 |
% |
|
|
95 |
% |
|
|
911 |
|
|
|
926 |
|
|
|
10,803 |
|
NY-Long
Island
|
Bayview
& Colonial
|
|
|
160 |
|
|
|
40 |
|
2000
|
|
|
884 |
|
|
|
38 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
1,202 |
|
|
|
1,186 |
|
|
|
15,119 |
|
NY-Long
Island
|
Cambridge
Village Associates
|
|
|
82 |
|
|
|
40 |
|
2002
|
|
|
747 |
|
|
|
31 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,604 |
|
|
|
1,536 |
|
|
|
8,269 |
|
NY-Long
Island
|
Coventry
Village Apartments
|
|
|
94 |
|
|
|
32 |
|
1998
|
|
|
831 |
|
|
|
33 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,382 |
|
|
|
1,357 |
|
|
|
6,590 |
|
NY-Long
Island
|
Devonshire
Hills
|
|
|
297 |
|
|
|
39 |
|
2001
|
|
|
803 |
|
|
|
41 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,713 |
|
|
|
1,720 |
|
|
|
56,340 |
|
NY-Long
Island
|
East
Winds Apartments
|
|
|
96 |
|
|
|
41 |
|
2000
|
|
|
888 |
|
|
|
31 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
1,171 |
|
|
|
1,145 |
|
|
|
9,145 |
|
NY-Long
Island
|
Hawthorne
Court
|
|
|
434 |
|
|
|
39 |
|
2002
|
|
|
678 |
|
|
|
42 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
1,374 |
|
|
|
1,361 |
|
|
|
50,092 |
|
NY-Long
Island
|
Heritage
Square
|
|
|
80 |
|
|
|
58 |
|
2002
|
|
|
718 |
|
|
|
35 |
% |
|
|
97 |
% |
|
|
98 |
% |
|
|
1,601 |
|
|
|
1,529 |
|
|
|
9,387 |
|
NY-Long
Island
|
Holiday
Square
|
|
|
144 |
|
|
|
28 |
|
2002
|
|
|
570 |
|
|
|
19 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,131 |
|
|
|
1,087 |
|
|
|
11,817 |
|
NY-Long
Island
|
Lake
Grove Apartments
|
|
|
368 |
|
|
|
37 |
|
1997
|
|
|
836 |
|
|
|
39 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
1,384 |
|
|
|
1,391 |
|
|
|
35,112 |
|
NY-Long
Island
|
Maple
Tree
|
|
|
84 |
|
|
|
56 |
|
2000
|
|
|
936 |
|
|
|
37 |
% |
|
|
92 |
% |
|
|
96 |
% |
|
|
1,151 |
|
|
|
1,153 |
|
|
|
7,932 |
|
NY-Long
Island
|
Mid-Island
Apartments
|
|
|
232 |
|
|
|
42 |
|
1997
|
|
|
546 |
|
|
|
29 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
1,299 |
|
|
|
1,257 |
|
|
|
17,058 |
|
NY-Long
Island
|
Rider
Terrace
|
|
|
24 |
|
|
|
46 |
|
2000
|
|
|
825 |
|
|
|
58 |
% |
|
|
96 |
% |
|
|
93 |
% |
|
|
1,253 |
|
|
|
1,245 |
|
|
|
2,156 |
|
NY-Long
Island
|
Sayville
Commons
|
|
|
342 |
|
|
|
6 |
|
2005
|
|
|
1,106 |
|
|
|
18 |
% |
|
|
98 |
% |
|
|
98 |
% |
|
|
1,464 |
|
|
|
1,395 |
|
|
|
65,310 |
|
NY-Long
Island
|
South
Bay Manor
|
|
|
61 |
|
|
|
47 |
|
2000
|
|
|
849 |
|
|
|
51 |
% |
|
|
95 |
% |
|
|
91 |
% |
|
|
1,573 |
|
|
|
1,536 |
|
|
|
7,975 |
|
NY-Long
Island
|
Southern
Meadows
|
|
|
452 |
|
|
|
36 |
|
2001
|
|
|
845 |
|
|
|
39 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,337 |
|
|
|
1,352 |
|
|
|
50,503 |
|
NY-Long
Island
|
Stratford
Greens Associates
|
|
|
359 |
|
|
|
33 |
|
2002
|
|
|
725 |
|
|
|
45 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,414 |
|
|
|
1,399 |
|
|
|
56,003 |
|
NY-Long
Island
|
Terry
Apartments
|
|
|
65 |
|
|
|
31 |
|
2000
|
|
|
722 |
|
|
|
46 |
% |
|
|
88 |
% |
|
|
96 |
% |
|
|
1,161 |
|
|
|
1,151 |
|
|
|
5,463 |
|
NY-Long
Island
|
Westwood
Village Apartments
|
|
|
242 |
|
|
|
38 |
|
2002
|
|
|
829 |
|
|
|
37 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
2,227 |
|
|
|
2,154 |
|
|
|
41,524 |
|
NY-Long
Island
|
Woodmont
Village Apartments
|
|
|
96 |
|
|
|
39 |
|
2002
|
|
|
704 |
|
|
|
35 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,311 |
|
|
|
1,283 |
|
|
|
11,343 |
|
NY-Long
Island
|
Yorkshire
Village Apartments
|
|
|
40 |
|
|
|
38 |
|
2002
|
|
|
779 |
|
|
|
38 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,630 |
|
|
|
1,560 |
|
|
|
4,478 |
|
PA-Philadelphia
|
Beechwood
Gardens
|
|
|
160 |
|
|
|
40 |
|
1998
|
|
|
875 |
|
|
|
59 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
830 |
|
|
|
830 |
|
|
|
8,784 |
|
PA-Philadelphia
|
Castle
Club Apartments
|
|
|
158 |
|
|
|
40 |
|
2000
|
|
|
878 |
|
|
|
50 |
% |
|
|
93 |
% |
|
|
94 |
% |
|
|
929 |
|
|
|
930 |
|
|
|
14,231 |
|
PA-Philadelphia
|
Chesterfield
Apartments
|
|
|
247 |
|
|
|
34 |
|
1997
|
|
|
812 |
|
|
|
31 |
% |
|
|
95 |
% |
|
|
97 |
% |
|
|
903 |
|
|
|
901 |
|
|
|
16,043 |
|
PA-Philadelphia
|
Curren
Terrace
|
|
|
318 |
|
|
|
36 |
|
1997
|
|
|
782 |
|
|
|
43 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
914 |
|
|
|
907 |
|
|
|
20,817 |
|
PA-Philadelphia
|
Glen
Brook Apartments
|
|
|
174 |
|
|
|
44 |
|
1999
|
|
|
707 |
|
|
|
47 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
817 |
|
|
|
813 |
|
|
|
9,397 |
|
PA-Philadelphia
|
Glen
Manor Apartments
|
|
|
174 |
|
|
|
31 |
|
1997
|
|
|
667 |
|
|
|
40 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
788 |
|
|
|
762 |
|
|
|
8,433 |
|
PA-Philadelphia
|
Golf
Club Apartments
|
|
|
399 |
|
|
|
38 |
|
2000
|
|
|
857 |
|
|
|
49 |
% |
|
|
95 |
% |
|
|
93 |
% |
|
|
1,015 |
|
|
|
1,010 |
|
|
|
38,734 |
|
PA-Philadelphia
|
Hill
Brook Place Apartments
|
|
|
274 |
|
|
|
39 |
|
1999
|
|
|
699 |
|
|
|
38 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
881 |
|
|
|
874 |
|
|
|
17,602 |
|
PA-Philadelphia
|
Home
Properties of Bryn Mawr
|
|
|
316 |
|
|
|
56 |
|
2000
|
|
|
822 |
|
|
|
56 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
1,037 |
|
|
|
1,051 |
|
|
|
32,154 |
|
PA-Philadelphia
|
Home
Properties of Devon
|
|
|
631 |
|
|
|
44 |
|
2000
|
|
|
917 |
|
|
|
49 |
% |
|
|
95 |
% |
|
|
93 |
% |
|
|
1,088 |
|
|
|
1,088 |
|
|
|
66,216 |
|
PA-Philadelphia
|
Home
Properties of Newark
|
|
|
432 |
|
|
|
39 |
|
1999
|
|
|
860 |
|
|
|
43 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
858 |
|
|
|
852 |
|
|
|
29,224 |
|
PA-Philadelphia
|
New
Orleans Park
|
|
|
442 |
|
|
|
36 |
|
1997
|
|
|
685 |
|
|
|
43 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
849 |
|
|
|
818 |
|
|
|
26,705 |
|
PA-Philadelphia
|
Racquet
Club East Apartments
|
|
|
466 |
|
|
|
36 |
|
1998
|
|
|
911 |
|
|
|
41 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
1,014 |
|
|
|
1,022 |
|
|
|
34,540 |
|
PA-Philadelphia
|
Racquet
Club South
|
|
|
103 |
|
|
|
38 |
|
1999
|
|
|
816 |
|
|
|
38 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
867 |
|
|
|
876 |
|
|
|
6,533 |
|
PA-Philadelphia
|
Ridley
Brook Apartments
|
|
|
244 |
|
|
|
45 |
|
1999
|
|
|
925 |
|
|
|
32 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
888 |
|
|
|
877 |
|
|
|
13,709 |
|
PA-Philadelphia
|
Sherry
Lake Apartments
|
|
|
298 |
|
|
|
42 |
|
1998
|
|
|
812 |
|
|
|
47 |
% |
|
|
92 |
% |
|
|
94 |
% |
|
|
1,164 |
|
|
|
1,159 |
|
|
|
28,419 |
|
PA-Philadelphia
|
The
Brooke at Peachtree Village
|
|
|
146 |
|
|
|
21 |
|
2005
|
|
|
1,261 |
|
|
|
34 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,065 |
|
|
|
1,014 |
|
|
|
17,889 |
|
PA-Philadelphia
|
The
Landings
|
|
|
384 |
|
|
|
34 |
|
1996
|
|
|
912 |
|
|
|
51 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
964 |
|
|
|
960 |
|
|
|
29,080 |
|
PA-Philadelphia
|
Trexler
Park Apartments
|
|
|
250 |
|
|
|
33 |
|
2000
|
|
|
921 |
|
|
|
48 |
% |
|
|
92 |
% |
|
|
91 |
% |
|
|
1,038 |
|
|
|
1,051 |
|
|
|
23,154 |
|
PA-Philadelphia
|
Valley
View Apartments
|
|
|
177 |
|
|
|
34 |
|
1997
|
|
|
764 |
|
|
|
66 |
% |
|
|
89 |
% |
|
|
90 |
% |
|
|
826 |
|
|
|
833 |
|
|
|
10,734 |
|
PA-Philadelphia
|
Village
Square (PA)
|
|
|
128 |
|
|
|
34 |
|
1997
|
|
|
795 |
|
|
|
53 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
933 |
|
|
|
909 |
|
|
|
8,331 |
|
PA-Philadelphia
|
William
Henry Apartments
|
|
|
363 |
|
|
|
36 |
|
2000
|
|
|
938 |
|
|
|
50 |
% |
|
|
95 |
% |
|
|
92 |
% |
|
|
1,081 |
|
|
|
1,095 |
|
|
|
37,886 |
|
VA-Suburban
DC
|
Braddock
Lee Apartments
|
|
|
255 |
|
|
|
52 |
|
1998
|
|
|
757 |
|
|
|
26 |
% |
|
|
96 |
% |
|
|
97 |
% |
|
|
1,231 |
|
|
|
1,200 |
|
|
|
20,041 |
|
VA-Suburban
DC
|
Cider
Mill
|
|
|
864 |
|
|
|
29 |
|
2002
|
|
|
834 |
|
|
|
37 |
% |
|
|
95 |
% |
|
|
94 |
% |
|
|
1,065 |
|
|
|
1,055 |
|
|
|
94,601 |
|
VA-Suburban
DC
|
Cinnamon
Run
|
|
|
511 |
|
|
|
47 |
|
2005
|
|
|
1,006 |
|
|
|
35 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
1,143 |
|
|
|
1,112 |
|
|
|
71,448 |
|
VA-Suburban
DC
|
East
Meadow Apartments
|
|
|
150 |
|
|
|
36 |
|
2000
|
|
|
1,034 |
|
|
|
39 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,315 |
|
|
|
1,262 |
|
|
|
15,416 |
|
VA-Suburban
DC
|
Elmwood
Terrace
|
|
|
504 |
|
|
|
34 |
|
2000
|
|
|
946 |
|
|
|
47 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
880 |
|
|
|
848 |
|
|
|
31,162 |
|
VA-Suburban
DC
|
Falkland
Chase Apartments
|
|
|
450 |
|
|
|
70 |
|
2003
|
|
|
759 |
|
|
|
42 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
1,294 |
|
|
|
1,220 |
|
|
|
65,868 |
|
VA-Suburban
DC
|
Orleans
Village
|
|
|
851 |
|
|
|
39 |
|
2000
|
|
|
1,015 |
|
|
|
43 |
% |
|
|
93 |
% |
|
|
94 |
% |
|
|
1,277 |
|
|
|
1,254 |
|
|
|
89,270 |
|
VA-Suburban
DC
|
Park
Shirlington Apartments
|
|
|
294 |
|
|
|
52 |
|
1998
|
|
|
858 |
|
|
|
26 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,206 |
|
|
|
1,185 |
|
|
|
23,743 |
|
VA-Suburban
DC
|
Peppertree
Farm
|
|
|
880 |
|
|
|
53 |
|
2005
|
|
|
1,051 |
|
|
|
40 |
% |
|
|
90 |
% |
|
|
89 |
% |
|
|
1,108 |
|
|
|
1,095 |
|
|
|
104,504 |
|
VA-Suburban
DC
|
Seminary
Hill Apartments
|
|
|
296 |
|
|
|
47 |
|
1999
|
|
|
888 |
|
|
|
47 |
% |
|
|
93 |
% |
|
|
94 |
% |
|
|
1,200 |
|
|
|
1,186 |
|
|
|
23,245 |
|
VA-Suburban
DC
|
Seminary
Towers Apartments
|
|
|
540 |
|
|
|
43 |
|
1999
|
|
|
879 |
|
|
|
39 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
1,242 |
|
|
|
1,211 |
|
|
|
44,504 |
|
VA-Suburban
DC
|
Tamarron
Apartments
|
|
|
132 |
|
|
|
20 |
|
1999
|
|
|
1,075 |
|
|
|
34 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,397 |
|
|
|
1,325 |
|
|
|
12,485 |
|
VA-Suburban
DC
|
The
Apartments at Wellington Trace
|
|
|
240 |
|
|
|
5 |
|
2004
|
|
|
1,106 |
|
|
|
56 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
1,247 |
|
|
|
1,201 |
|
|
|
31,045 |
|
VA-Suburban
DC
|
The
Manor Apartments (MD)
|
|
|
435 |
|
|
|
38 |
|
2001
|
|
|
1,004 |
|
|
|
40 |
% |
|
|
93 |
% |
|
|
95 |
% |
|
|
1,125 |
|
|
|
1,123 |
|
|
|
47,548 |
|
VA-Suburban
DC
|
The
Manor Apartments (VA)
|
|
|
198 |
|
|
|
33 |
|
1999
|
|
|
845 |
|
|
|
43 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
989 |
|
|
|
981 |
|
|
|
12,092 |
|
VA-Suburban
DC
|
The
Sycamores
|
|
|
185 |
|
|
|
29 |
|
2002
|
|
|
876 |
|
|
|
36 |
% |
|
|
96 |
% |
|
|
97 |
% |
|
|
1,353 |
|
|
|
1,285 |
|
|
|
23,627 |
|
VA-Suburban
DC
|
Virginia
Village
|
|
|
344 |
|
|
|
40 |
|
2001
|
|
|
1,010 |
|
|
|
52 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,218 |
|
|
|
1,210 |
|
|
|
36,847 |
|
VA-Suburban
DC
|
West
Springfield Terrace
|
|
|
244 |
|
|
|
29 |
|
2002
|
|
|
1,019 |
|
|
|
38 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,388 |
|
|
|
1,336 |
|
|
|
38,455 |
|
VA-Suburban
DC
|
Woodleaf
Apartments
|
|
|
228 |
|
|
|
22 |
|
2004
|
|
|
709 |
|
|
|
28 |
% |
|
|
95 |
% |
|
|
94 |
% |
|
|
1,096 |
|
|
|
1,050 |
|
|
|
23,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
Total/Weighted Average
|
|
|
32,600 |
|
|
|
38 |
|
|
|
|
865 |
|
|
|
41 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
$ |
1,101 |
|
|
$ |
1,075 |
|
|
$ |
2,994,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Acquisition Communities (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MA-Boston
|
Highland
House
|
|
|
172 |
|
|
|
38 |
|
2006
|
|
|
733 |
|
|
|
31 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
$ |
1,118 |
|
|
$ |
1,072 |
|
|
$ |
18,593 |
|
MA-Boston
|
Liberty
Place
|
|
|
107 |
|
|
|
19 |
|
2006
|
|
|
994 |
|
|
|
39 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
1,397 |
|
|
|
1,344 |
|
|
|
16,227 |
|
MA-Boston
|
The
Heights at Marlborough
|
|
|
348 |
|
|
|
34 |
|
2006
|
|
|
876 |
|
|
|
53 |
% |
|
|
95 |
% |
|
|
92 |
% |
|
|
1,175 |
|
|
|
1,179 |
|
|
|
51,256 |
|
MA-Boston
|
The
Meadows at Marlborough
|
|
|
264 |
|
|
|
35 |
|
2006
|
|
|
855 |
|
|
|
52 |
% |
|
|
95 |
% |
|
|
90 |
% |
|
|
1,144 |
|
|
|
1,189 |
|
|
|
36,547 |
|
MD-Baltimore
|
Heritage
Woods
|
|
|
164 |
|
|
|
34 |
|
2006
|
|
|
965 |
|
|
|
30 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
951 |
|
|
|
898 |
|
|
|
14,779 |
|
MD-Baltimore
|
The
Coves at Chesapeake
|
|
|
469 |
|
|
|
25 |
|
2006
|
|
|
986 |
|
|
|
42 |
% |
|
|
92 |
% |
|
|
89 |
% |
|
|
1,153 |
|
|
|
1,115 |
|
|
|
69,469 |
|
MD-Baltimore
|
Top
Field
|
|
|
156 |
|
|
|
34 |
|
2006
|
|
|
1,149 |
|
|
|
28 |
% |
|
|
97 |
% |
|
|
98 |
% |
|
|
1,083 |
|
|
|
1,037 |
|
|
|
18,795 |
|
ME-Portland
|
Liberty
Commons
|
|
|
120 |
|
|
|
1 |
|
2006
|
|
|
1,064 |
|
|
|
53 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
1,139 |
|
|
|
1,074 |
|
|
|
14,760 |
|
VA-Suburban
DC
|
Mount
Vernon Square
|
|
|
1,387 |
|
|
|
33 |
|
2006
|
|
|
868 |
|
|
|
40 |
% |
|
|
95 |
% |
|
|
93 |
% |
|
|
1,131 |
|
|
|
1,076 |
|
|
|
146,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Total/Weighted Average
|
|
|
3,187 |
|
|
|
28 |
|
|
|
|
908 |
|
|
|
42 |
% |
|
|
95 |
% |
|
|
93 |
% |
|
$ |
1,137 |
|
|
$ |
1,127 |
|
|
$ |
387,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
Acquisition Communities (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MA-Boston
|
The
Townhomes of Beverly
|
|
|
204 |
|
|
|
37 |
|
2007
|
|
|
1,103 |
|
|
|
36 |
% |
|
|
93 |
% |
|
|
N/A |
|
|
$ |
1,423 |
|
|
|
N/A |
|
|
$ |
36,936 |
|
MA-Boston
|
Westwoods
|
|
|
35 |
|
|
|
17 |
|
2007
|
|
|
904 |
|
|
|
79 |
% |
|
|
93 |
% |
|
|
N/A |
|
|
|
1,189 |
|
|
|
N/A |
|
|
|
3,992 |
|
MD-Baltimore
|
Dunfield
Townhouses
|
|
|
312 |
|
|
|
20 |
|
2007
|
|
|
916 |
|
|
|
51 |
% |
|
|
94 |
% |
|
|
N/A |
|
|
|
1,029 |
|
|
|
N/A |
|
|
|
32,030 |
|
MD-Baltimore
|
Fox
Hall Apartments
|
|
|
720 |
|
|
|
31 |
|
2007
|
|
|
946 |
|
|
|
45 |
% |
|
|
95 |
% |
|
|
N/A |
|
|
|
827 |
|
|
|
N/A |
|
|
|
63,013 |
|
NJ-Northern
|
Jacob
Ford Village
|
|
|
270 |
|
|
|
59 |
|
2007
|
|
|
842 |
|
|
|
16 |
% |
|
|
92 |
% |
|
|
N/A |
|
|
|
1,025 |
|
|
|
N/A |
|
|
|
28,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
Total/Weighted Average
|
|
|
1,541 |
|
|
|
33 |
|
|
|
|
941 |
|
|
|
41 |
% |
|
|
94 |
% |
|
|
N/A |
|
|
$ |
993 |
|
|
|
N/A |
|
|
$ |
164,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
Construction Communities (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PA-Philadelphia
|
Trexler
Park West
|
|
|
168 |
|
|
|
0 |
|
2007
|
|
|
1,088 |
|
|
|
32 |
% |
|
|
85 |
% |
|
|
67 |
% |
|
$ |
1,255 |
|
|
$ |
1,205 |
|
|
$ |
21,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned
Portfolio Total/Weighted Average
|
|
|
37,496 |
|
|
|
37 |
|
|
|
|
873 |
|
|
|
41 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
$ |
1,101 |
|
|
$ |
1,076 |
|
|
$ |
3,566,721 |
|
(1) "Core
Communities" represents the 32,600 apartment units owned consistently throughout
2007 and 2006.
(2)
“Resident Turnover" reflects, on an annual basis, the number of moveouts divided
by the total number of apartment units.
(3)
"Average % Occupancy" is the average physical occupancy for the years ended
December 31, 2007 and 2006.
(4) For
communities acquired during 2007 and 2006, this is the average occupancy from
the date of acquisition.
(5)
Trexler Park West is under construction. Upon completion there will
be a total of 216 apartment units. As of December 31, 2007, 168 apartment units
were in service.
Property
Development
The
Company has the ability to develop new market-rate communities. It
plans to engage in development activity only in markets in which it currently is
doing business to add net asset value and supplement future earnings and
growth. It expects to develop new apartment communities on raw land
and on land adjacent to existing Owned Properties, as well as to increase the
density of units at some communities currently owned.
The
Company is developing a 216 unit apartment community in Allentown, Pennsylvania,
adjacent to a market-rate community purchased in 2000. At year-end
2007, 168 units were completed at a cost of $21.1 million. The entire
project is expected to be completed in the third quarter of 2008. The
total construction cost for this development is anticipated to be $26.1 million
upon completion. The costs associated with construction in progress
for this development were $0.3 million as of December 31,
2007.
A project
at 1200 East West Highway in Silver Spring, Maryland was also under construction
during 2007. It is a 14-story high rise with 247 apartments and
10,600 square feet of retail or nonresidential space that is expected to be
completed in the fourth quarter of 2009 at a total cost of $74
million. The property is approximately three blocks south of Home
Properties’ Falkland Chase apartment community. The costs associated with
construction in progress for this development were $17.5 million as of December
31, 2007.
The
Company had two projects in the pre-construction phase during
2007. The Courts at Huntington Station is a podium design with 421
units adjacent to the Huntington Metro station just south of Old Town Alexandria
in Fairfax County, Virginia and consists of four, four-story
buildings. Construction is expected to begin in 2008 with completion
in 2011 at a total cost of $123 million. The costs associated with
construction in progress for this development were $36.3 million as of December
31, 2007.
The other
project in pre-construction is the redevelopment of Falkland Chase, located in
Silver Spring, Maryland, with 450 garden apartments constructed between 1936 and
1939. The Company acquired the property in 2003 for $58.7
million. The property is located within walking distance of the metro
line into Washington, D. C. and is near seven million square feet of office
space. The Company is planning on redeveloping the North parcel,
which will be renamed Falkland North. The Company has submitted plans
to redevelop this parcel into 1,059 units in four high-rise buildings with a
community center, exercise room, swimming pool, convenience retail shops and a
major supermarket. If approved, construction is expected to start in
2010, with completion anticipated in 2014 at a total cost of $317.7
million. The pre-construction costs associated with this project were
$1.2 million as of December 31, 2007.
During
2007, the Company added to the Development Division staff which now has a total
of seven employees with additional staff planned in 2008. As a
compliment to the Development Division staff, the managers of the Company’s
extensive property portfolio and its acquisition staff also are a source of
identifying potential new development opportunities.
Property
Management
As of
December 31, 2007, the Managed Properties consist of two multifamily
communities, one 868 unit community managed as general partner in Columbus, Ohio
and one fee-managed 282 unit community in Annapolis, Maryland.
The
Company may pursue the management of additional properties not owned by the
Company, but will only do so when such additional properties can be effectively
and efficiently managed in conjunction with other properties owned or managed by
Home Properties, or where the Company views the properties as potential
acquisitions in desirable markets.
Supplemental Property
Information
At
December 31, 2007, none of the Properties have an individual net book value
equal to or greater than ten percent of the total assets of the Company or would
have accounted for ten percent or more of the Company's aggregate gross revenues
for 2007. There is no resident who has one or more leases which, in
the aggregate, account for more than 10% of the aggregate gross revenues for the
year ended December 31, 2007.
The
Company is subject to a variety of legal actions for personal injury or property
damage arising in the ordinary course of its business, most of which are covered
by liability insurance. Various claims of employment and resident
discrimination are also periodically brought. While the resolution of
these matters cannot be predicted with certainty, management believes that the
final outcome of such legal proceedings and claims will not have a material
adverse effect on the Company's liquidity, financial position or results of
operations.
Item
4. Submission of Matters to
Vote of Security Holders
None.
The
following table sets forth, as of February 22, 2008, the nine executive officers
of the Company, together with their respective ages, positions and
offices.
Name
|
|
Age
|
|
Position
|
Edward
J. Pettinella
|
|
|
56
|
|
President
and Chief Executive Officer of Home Properties and
HPRS
|
David
P. Gardner
|
|
|
52
|
|
Executive
Vice President and Chief Financial Officer of
Home Properties and HPRS
|
Ann
M. McCormick
|
|
|
51
|
|
Executive
Vice President, General Counsel and Secretary of Home Properties and
HPRS
|
Lisa
M. Critchley
|
|
|
46 |
|
Senior
Vice President, Human Resources of Home Properties
|
Scott
A. Doyle
|
|
|
46 |
|
Senior
Vice President, Property Management of Home Properties and
HPRS
|
Johanna
A. Falk
|
|
|
43 |
|
Senior
Vice President and Chief Administrative/Information Officer of Home
Properties and HPRS
|
Donald
R. Hague
|
|
|
56 |
|
Senior
Vice President, Development of Home Properties
|
Robert
J. Luken
|
|
|
43 |
|
Senior
Vice President, Chief Accounting Officer and Treasurer of
Home Properties and HPRS
|
John
E. Smith
|
|
|
57 |
|
Senior
Vice President and Chief Investment Officer of Home Properties and
HPRS
|
Information
regarding Edward J. Pettinella is set forth below under "Directors" in Item
10.
David P. Gardner has served as
Executive Vice President of the Company since 2004 and a Vice President and
Chief Financial Officer of the Company since its inception. He holds
the same titles in HPRS. Mr. Gardner joined Home Leasing Corporation
in 1984 as Vice President and Controller. In 1989, he was named
Treasurer of Home Leasing and Chief Financial Officer in December
1993. From 1977 until joining Home Leasing, Mr. Gardner was an
accountant at Cortland L. Brovitz & Co. Mr. Gardner is a graduate
of the Rochester Institute of Technology and is a Certified
Public Accountant.
Ann M. McCormick has served as
Executive Vice President since 2004 and a Vice President, General Counsel and
Secretary of the Company since its inception. She holds the same
titles in HPRS. Mrs. McCormick joined Home Leasing in 1987 and
was named Vice President, Secretary and General Counsel in
1991. Prior to joining Home Leasing, she was an associate with the
law firm of Nixon Peabody LLP. Mrs. McCormick is a graduate
of
Colgate
University and holds a Juris Doctor from Cornell University. She is
on the Board of Directors of Greater Rochester Housing Partnership, Flower City
Habitat for Humanity, and St. Ann's of Greater Rochester, Inc.
Lisa M. Critchley has served
as Senior Vice President since joining the Company in June
2007. Prior to joining the Company, she was employed by ALSTOM
Signaling, Inc. as Director of Human Resources since 2004. She was an
Assistant Dean at the William E. Simon School of Business Administration from
1999 until 2004. Mrs. Critchley is a graduate of the St. John Fisher
College.
Scott A. Doyle has served as a
Senior Vice President since 2000, and, from 1997 until 2000, was a Vice
President of the Company. He holds the same title in
HPRS. He joined Home Properties in 1996 as a Regional Property
Manager. Mr. Doyle has been in property management for more than
20 years and is a Certified Property Manager (CPM) as designated by the
Institute of Real Estate Management. Prior to joining
Home Properties, he worked with CMH Properties, Inc., Rivercrest Realty
Associates and Arcadia Management Company. Mr. Doyle serves on the
Advisory Board of the Residential Property Management Program at Virginia
Tech. He is a graduate of State University at Plattsburgh,
New York.
Johanna A. Falk has served as
Senior Vice President since 2000 and as Chief Administrative/Information Officer
since 2003. She had been a Vice President of the Company since
1997. She holds the same titles in HPRS. She joined the
Company in 1995 as an investor relations specialist, was responsible for the
Information Systems Department through 2002, and was promoted to Chief
Administrative/Information Officer in February 2003. Prior to joining
the Company, Mrs. Falk was employed as a marketing manager at Bausch &
Lomb Incorporated and Champion Products, Inc. and as a financial analyst at
Kidder Peabody. She is a graduate of Cornell University and holds an
MBA from the Wharton School of The University of Pennsylvania. She is
the step-daughter of Nelson B. Leenhouts, a director of the
Company.
Donald R. Hague joined the
Company in 2006 as a Vice President. He was elected a Senior Vice
President effective January 1, 2008. Prior to joining the Company,
Mr. Hague was a Vice President of KSI Services, Inc. since 2000. He
is a graduate of Davidson College and holds an MBA from George Washington
University.
Robert J. Luken has served as
Senior Vice President since 2004, and as Chief Accounting Officer since January,
2005. He has been the Company's Treasurer since 2000 and became a
Vice President in 1997. He holds the same title in
HPRS. He joined the Company in 1996, serving as its
Controller. Prior to joining the Company, he was the Controller of
Bell Corp. of Rochester and an Audit Supervisor for
PricewaterhouseCoopers LLP. Mr. Luken is a graduate of St. John
Fisher College and is a Certified Public Accountant. He is on the
Board of Directors of St. Joseph's Villa of Rochester.
John E. Smith has served as
Chief Investment Officer of the Company since January, 2006, and as Senior Vice
President since 2001. From 1998 until 2001, he was a Vice President
of the Company. He holds the same title in HPRS. Prior to
joining the Company in 1997, Mr. Smith was general manager for Direct Response
Marketing, Inc. and Executive Vice President for The Equity Network,
Inc. Mr. Smith was Director of Investment Properties at Hunt
Commercial Real Estate for 20 years. He has been a Certified
Commercial Investment Member (CCIM) since 1982, a New York State Certified
Instructor and has taught accredited commercial real estate courses at various
institutions in four states.
Item
5. Market for the Registrant's Common Stock and
Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information, Holders
and Dividends
The
Common Stock has been traded on the New York Stock Exchange ("NYSE") under the
symbol "HME" since July 28, 1994. The following table sets forth for
the previous two years the quarterly high and low sales prices per share
reported on the NYSE, as well as all dividends paid with respect to the common
stock.
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
2007
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$ |
64.97 |
|
|
$ |
51.59 |
|
|
$ |
.65 |
|
Second
Quarter
|
|
$ |
58.49 |
|
|
$ |
50.55 |
|
|
$ |
.65 |
|
Third
Quarter
|
|
$ |
56.90 |
|
|
$ |
45.01 |
|
|
$ |
.65 |
|
Fourth
Quarter
|
|
$ |
56.65 |
|
|
$ |
41.10 |
|
|
$ |
.66 |
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$ |
52.47 |
|
|
$ |
41.70 |
|
|
$ |
.64 |
|
Second
Quarter
|
|
$ |
55.51 |
|
|
$ |
47.24 |
|
|
$ |
.64 |
|
Third
Quarter
|
|
$ |
58.98 |
|
|
$ |
53.79 |
|
|
$ |
.64 |
|
Fourth
Quarter
|
|
$ |
63.52 |
|
|
$ |
57.36 |
|
|
$ |
.65 |
|
As of
February 22, 2008, the Company had approximately 3,910 shareholders of
record, 32,619,928 common shares (plus 13,444,166 UPREIT Units convertible into
13,444,166 common shares) were outstanding, and the closing price was
$46.27. It is the Company's policy to pay dividends. The
Company has historically paid dividends on a quarterly basis in the months of
February, May, August and November.
Securities Authorized for
Issuance Under Equity Compensation Plans
The
following table provides information as of December 31, 2007, with respect to
shares of our common stock that may be issued under the Stock Benefit
Plans:
Plan Category
|
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options
|
|
|
Weighted
Average Exercise Price of Outstanding Options
|
|
|
Number
of Securities Remaining Available for Future Issuance
|
|
|
|
|
|
|
|
|
|
|
|
Options:
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
2,481,328 |
|
|
$ |
44.06 |
|
|
|
149,775 |
|
Equity
compensation plans not approved by security holders
|
|
|
170,194 |
|
|
|
32.70 |
|
|
|
- |
|
Total
Options
|
|
|
2,651,522 |
|
|
$ |
43.33 |
|
|
|
149,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
164,099 |
|
|
|
N/A |
|
|
|
15,373 |
|
Equity
compensation plans not approved by security holders
|
|
|
51,800 |
|
|
|
N/A |
|
|
|
- |
|
Total
Restricted Stock Awards
|
|
|
215,899 |
|
|
|
N/A |
|
|
|
15,373 |
|
Performance
Graph
The
following graph compares the cumulative return on the Company's common stock
during the five year period ended December 31, 2007 to the cumulative return of
the NAREIT All Equity REIT Index and the Standard and Poor's 500 Index for the
same period. The total return assumes that dividends were reinvested
quarterly at the same price as provided under the Company’s Dividend
Reinvestment and Direct Stock Purchase Plan (with a discount for 2002 through
2004, and without a discount for 2005 through 2007) and is based on a $100
investment on December 31, 2002. Stockholders should note that past
performance does not predict future results.
|
|
12/31/2002
|
|
|
12/31/2003
|
|
|
12/31/2004
|
|
|
12/31/2005
|
|
|
12/31/2006
|
|
|
12/31/2007
|
|
HME
|
|
$ |
100.00 |
|
|
$ |
125.63 |
|
|
$ |
142.36 |
|
|
$ |
143.60 |
|
|
$ |
218.84 |
|
|
$ |
174.19 |
|
NAREIT
Equity
|
|
$ |
100.00 |
|
|
$ |
137.13 |
|
|
$ |
180.43 |
|
|
$ |
202.38 |
|
|
$ |
273.34 |
|
|
$ |
230.45 |
|
S&P
500
|
|
$ |
100.00 |
|
|
$ |
128.70 |
|
|
$ |
142.69 |
|
|
$ |
149.69 |
|
|
$ |
173.34 |
|
|
$ |
182.86 |
|
Our
future filings with the SEC may "incorporate information by reference,"
including this Form 10-K. Unless we specifically state otherwise,
this Performance Graph shall not be deemed to be incorporated by reference and
shall not constitute soliciting material or otherwise be considered filed under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended.
Issuer Purchases of Equity
Securities
In 1997,
the Company's Board of Directors approved a stock repurchase program under which
the Company may repurchase shares of its outstanding common stock and UPREIT
Units. The shares/units may be repurchased through open market or
privately negotiated transactions at the discretion of Company
management. The Board's action does not establish a specific target
stock price or a specific timetable for share repurchase. In
addition, participants in the Company’s Stock Benefit Plan can use common stock
of the Company that they already own to pay all or a portion of the exercise
price payable to the Company upon the exercise of an option. In such
event, the common stock used to pay the exercise price is returned to authorized
but unissued status, and for purposes of this table is deemed to have been
repurchased by the Company. At December 31, 2006, the Company had
authorization to repurchase 2,606,448 shares of common stock and UPREIT Units
under the stock repurchase program. During 2007, the Company
repurchased 1,243,700 shares at a cost of $58,285,262, resulting in a remaining
authorization level of 1,362,748 shares as of December 31, 2007.
The
following table summarizes the total number of shares (units) repurchased by the
Company during the year ended December 31, 2007:
|
|
|
|
|
|
|
|
Total
|
|
|
Board
|
|
|
|
|
|
|
|
|
|
|
|
|
shares/units
|
|
|
approved
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
increase
|
|
|
shares/units
|
|
|
|
Total
|
|
|
Average
|
|
|
under
|
|
|
under
|
|
|
available
under
|
|
|
|
shares/units
|
|
|
price
per
|
|
|
Company
|
|
|
Company
|
|
|
the
Company
|
|
Period
|
|
purchased
(1)
|
|
|
share/unit
|
|
|
Program
|
|
|
Program
|
|
|
Program
|
|
Balance
January 1, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,606,448 |
|
January,
2007
|
|
|
- |
|
|
-
|
|
|
|
- |
|
|
|
- |
|
|
|
2,606,448 |
|
February,
2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,606,448 |
|
March,
2007
|
|
|
113,372 |
|
|
$ |
55.11 |
|
|
|
109,000 |
|
|
|
- |
|
|
|
2,497,448 |
|
April,
2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,497,448 |
|
May,
2007
|
|
|
3,777 |
|
|
|
55.50 |
|
|
|
- |
|
|
|
- |
|
|
|
2,497,448 |
|
June,
2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,497,448 |
|
July,
2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,497,448 |
|
August,
2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,497,448 |
|
September,
2007
|
|
|
320,184 |
|
|
|
49.59 |
|
|
|
317,700 |
|
|
|
- |
|
|
|
2,179,748 |
|
October,
2007
|
|
|
1,330 |
|
|
|
52.46 |
|
|
|
- |
|
|
|
- |
|
|
|
2,179,748 |
|
November,
2007
|
|
|
832,515 |
|
|
|
44.70 |
|
|
|
817,000 |
|
|
|
- |
|
|
|
1,362,748 |
|
December,
2007
|
|
|
1,022 |
|
|
|
44.93 |
|
|
|
- |
|
|
|
- |
|
|
|
1,362,748 |
|
Balance
December 31, 2007:
|
|
|
1,272,200 |
|
|
$ |
46.90 |
|
|
|
1,243,700 |
|
|
|
- |
|
|
|
1,362,748 |
|
(1)
|
During
2007, and as permitted by the Company’s stock option plans, 10,597 shares
of common stock already owned by option holders were used by those holders
to pay the exercise price associated with their option
exercise. These shares were returned to the status of
authorized but unissued shares. In addition, the Company
repurchased 17,903 shares of common stock through share repurchase by the
transfer agent in the open market in connection with the Company’s
Dividend Reinvestment and Direct Stock Purchase
Plan.
|
Item
6. Selected Financial and
Operating Information
The
following table sets forth selected financial and operating data on a historical
basis for the Company and should be read in conjunction with the financial
statements appearing elsewhere in this Form 10-K (amounts in thousands, except
per share and unit data).
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$ |
464,324 |
|
|
$ |
408,119 |
|
|
$ |
365,854 |
|
|
$ |
336,445 |
|
|
$ |
299,681 |
|
Other
income (1)
|
|
|
40,864 |
|
|
|
32,106 |
|
|
|
21,508 |
|
|
|
17,747 |
|
|
|
16,873 |
|
Total
revenues
|
|
|
505,188 |
|
|
|
440,225 |
|
|
|
387,362 |
|
|
|
354,192 |
|
|
|
316,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
and maintenance
|
|
|
211,126 |
|
|
|
184,860 |
|
|
|
169,015 |
|
|
|
152,607 |
|
|
|
131,954 |
|
General
and administrative
|
|
|
23,413 |
|
|
|
22,626 |
|
|
|
19,652 |
|
|
|
23,978 |
|
|
|
22,607 |
|
Interest
|
|
|
119,383 |
|
|
|
104,735 |
|
|
|
90,079 |
|
|
|
74,993 |
|
|
|
68,073 |
|
Depreciation
and amortization
|
|
|
110,329 |
|
|
|
92,902 |
|
|
|
78,125 |
|
|
|
68,258 |
|
|
|
55,674 |
|
Impairment
of assets held as general partner
|
|
|
- |
|
|
|
- |
|
|
|
400 |
|
|
|
1,116 |
|
|
|
2,518 |
|
Total
expenses
|
|
|
464,251 |
|
|
|
405,123 |
|
|
|
357,271 |
|
|
|
320,952 |
|
|
|
280,826 |
|
Income
from operations
|
|
|
40,937 |
|
|
|
35,102 |
|
|
|
30,091 |
|
|
|
33,240 |
|
|
|
35,728 |
|
Equity
in losses of unconsolidated affiliates
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(538 |
) |
|
|
(1,892 |
) |
Income
before minority interest, discontinued operations, loss on disposition of
property and
business and cumulative
effect of change in accounting principle
|
|
|
40,937 |
|
|
|
35,102 |
|
|
|
30,091 |
|
|
|
32,702 |
|
|
|
33,836 |
|
Minority
interest in limited partnership
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
441 |
|
|
|
- |
|
Minority
interest in operating partnerships
|
|
|
(10,824 |
) |
|
|
(8,847 |
) |
|
|
(7,852 |
) |
|
|
(8,187 |
) |
|
|
(7,974 |
) |
Income
from continuing operations
|
|
|
30,113 |
|
|
|
26,255 |
|
|
|
22,239 |
|
|
|
24,956 |
|
|
|
25,862 |
|
Discontinued
operations, net of minority interest
|
|
|
31,431 |
|
|
|
84,230 |
|
|
|
59,273 |
|
|
|
22,454 |
|
|
|
15,945 |
|
Income
before loss on disposition of property and business and cumulative effect
of change in accounting principle
|
|
|
61,544 |
|
|
|
110,485 |
|
|
|
81,512 |
|
|
|
47,410 |
|
|
|
41,807 |
|
Loss
on disposition of property and business, net of minority
interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(67 |
) |
|
|
(9 |
) |
Income
before cumulative effect of change in accounting principle
|
|
|
61,544 |
|
|
|
110,485 |
|
|
|
81,512 |
|
|
|
47,343 |
|
|
|
41,798 |
|
Cumulative
effect of change in accounting principle, net of minority
interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(321 |
) |
|
|
- |
|
Net
income
|
|
|
61,544 |
|
|
|
110,485 |
|
|
|
81,512 |
|
|
|
47,022 |
|
|
|
41,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
dividends
|
|
|
(1,290 |
) |
|
|
(5,400 |
) |
|
|
(6,279 |
) |
|
|
(7,593 |
) |
|
|
(11,340 |
) |
Preferred
stock issuance costs write-off
|
|
|
(1,902 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income available to common shareholders
|
|
$ |
58,352 |
|
|
$ |
105,085 |
|
|
$ |
75,233 |
|
|
$ |
39,429 |
|
|
$ |
30,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.81 |
|
|
$ |
0.64 |
|
|
$ |
0.50 |
|
|
$ |
0.53 |
|
|
$ |
0.50 |
|
Discontinued
operations
|
|
|
0.95 |
|
|
|
2.57 |
|
|
|
1.85 |
|
|
|
0.68 |
|
|
|
0.54 |
|
Cumulative
effect of change in accounting principle
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.01 |
) |
|
|
- |
|
Net
income available to common shareholders
|
|
$ |
1.76 |
|
|
$ |
3.21 |
|
|
$ |
2.35 |
|
|
$ |
1.20 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.80 |
|
|
$ |
0.62 |
|
|
$ |
0.49 |
|
|
$ |
0.52 |
|
|
$ |
0.49 |
|
Discontinued
operations
|
|
|
0.93 |
|
|
|
2.53 |
|
|
|
1.84 |
|
|
|
0.67 |
|
|
|
0.54 |
|
Cumulative
effect of change in accounting principle
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.01 |
) |
|
|
- |
|
Net
income available to common shareholders
|
|
$ |
1.73 |
|
|
$ |
3.15 |
|
|
$ |
2.33 |
|
|
$ |
1.18 |
|
|
$ |
1.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared per common share
|
|
$ |
2.61 |
|
|
$ |
2.57 |
|
|
$ |
2.53 |
|
|
$ |
2.49 |
|
|
$ |
2.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate, before accumulated depreciation
|
|
$ |
3,680,155 |
|
|
$ |
3,451,762 |
|
|
$ |
3,330,710 |
|
|
$ |
3,123,901 |
|
|
$ |
2,752,992 |
|
Total
assets
|
|
|
3,216,423 |
|
|
|
3,240,418 |
|
|
|
2,977,870 |
|
|
|
2,816,796 |
|
|
|
2,513,317 |
|
Total
debt (including held for sale)
|
|
|
2,189,289 |
|
|
|
2,124,313 |
|
|
|
1,924,086 |
|
|
|
1,702,722 |
|
|
|
1,380,696 |
|
Redeemable/convertible
preferred stock (2)
|
|
|
- |
|
|
|
60,000 |
|
|
|
60,000 |
|
|
|
85,000 |
|
|
|
85,000 |
|
Stockholders'
equity
|
|
|
668,061 |
|
|
|
755,617 |
|
|
|
656,812 |
|
|
|
720,422 |
|
|
|
741,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
$ |
162,558 |
|
|
$ |
162,996 |
|
|
$ |
136,466 |
|
|
$ |
159,342 |
|
|
$ |
154,227 |
|
Net
cash provided by (used in) investing activities
|
|
|
(87,553 |
) |
|
|
159,653 |
|
|
|
(179,944 |
) |
|
|
(160,654 |
) |
|
|
(109,253 |
) |
Net
cash provided by (used in) financing activities
|
|
|
(187,108 |
) |
|
|
(209,828 |
) |
|
|
40,944 |
|
|
|
3,284 |
|
|
|
(48,653 |
) |
Funds
From Operations (3)
|
|
|
151,067 |
|
|
|
147,089 |
|
|
|
137,606 |
|
|
|
126,953 |
|
|
|
132,803 |
|
Adjusted
Funds From Operations(4)
|
|
|
122,429 |
|
|
|
125,530 |
|
|
|
115,720 |
|
|
|
104,787 |
|
|
|
111,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
33,130,067 |
|
|
|
32,697,794 |
|
|
|
31,962,082 |
|
|
|
32,911,945 |
|
|
|
29,208,242 |
|
Diluted
|
|
|
33,794,526 |
|
|
|
33,337,557 |
|
|
|
32,328,105 |
|
|
|
33,314,038 |
|
|
|
29,575,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
communities owned at end of period
|
|
|
123 |
|
|
|
123 |
|
|
|
153 |
|
|
|
150 |
|
|
|
147 |
|
Total
apartment units owned at end of period
|
|
|
37,496 |
|
|
|
36,954 |
|
|
|
43,432 |
|
|
|
41,776 |
|
|
|
40,946 |
|
1)
|
Other
income includes property other income, interest income and other
income.
|
(2)
|
Redeemable
preferred stock was redeemable solely at the option of the
Company.
|
(3)
|
Pursuant
to the revised definition of Funds From Operations (“FFO”) adopted by the
Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT"), FFO is defined as net income (computed in accordance
with accounting principles generally accepted in the United States of
America ("GAAP")) excluding gains or losses from sales of property,
minority interest and extraordinary items plus depreciation from real
property including adjustments for unconsolidated partnerships and joint
ventures less dividends from non-convertible preferred
shares. In 2007, 2006 and 2003, the Company added back debt
extinguishment costs which were incurred as a result of repaying property
specific debt triggered upon sale as a gain or loss on sale of the
property. Because of the limitations of the FFO definition as
published by NAREIT as set forth above, the Company has made certain
interpretations in applying the definition. The Company
believes all adjustments not specifically provided for are consistent with
the definition.
|
|
FFO
falls within the definition of “non-GAAP financial measure” set forth in
Regulation S-K and as a result the Company is required to include in this
report a statement disclosing the reasons why management believes that
presentation of this measure provides useful information to
investors. Management believes that in order to facilitate a
clear understanding of the combined historical operating results of the
Company, FFO should be considered in conjunction with net income as
presented in the consolidated financial statements included elsewhere
herein. Management believes that by excluding gains or losses
related to dispositions of property and excluding real estate depreciation
(which can vary among owners of similar assets in similar condition based
on historical cost accounting and useful life estimates), FFO can help one
compare the operating performance of a company’s real estate between
periods or as compared to different companies. The Company also
uses this measure to compare its performance to that of its peer
group. FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and
is not necessarily indicative of cash available to fund cash
needs. FFO should not be considered as an alternative to net
income as an indication of the Company's performance or to cash flow as a
measure of liquidity.
|
|
The
following table sets forth the calculation of FFO and Adjusted Funds From
Operations (“AFFO”) for the previous five years, beginning with "net
income available to common shareholders" from the Company's audited
financial statements prepared in accordance with
GAAP:
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
Net
income available to common shareholders
|
|
$ |
58,352 |
|
|
$ |
105,085 |
|
|
$ |
75,233 |
|
|
$ |
39,429 |
|
|
$ |
30,458 |
|
Convertible
preferred dividends(a)
|
|
|
- |
|
|
|
- |
|
|
|
880 |
|
|
|
2,194 |
|
|
|
5,939 |
|
Depreciation
from real property(b)
|
|
|
110,536 |
|
|
|
99,421 |
|
|
|
97,686 |
|
|
|
91,564 |
|
|
|
79,577 |
|
Impairment
on general partner investment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
945 |
|
|
|
1,785 |
|
Loss
from sale of property
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
50 |
|
|
|
260 |
|
Minority
interest
|
|
|
10,824 |
|
|
|
8,847 |
|
|
|
7,852 |
|
|
|
8,187 |
|
|
|
7,974 |
|
Minority
interest – discontinued operations
|
|
|
542 |
|
|
|
2,714 |
|
|
|
2,605 |
|
|
|
5,370 |
|
|
|
7,376 |
|
Impairment
of real property
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
423 |
|
Gain
from sale of discontinued operations
|
|
|
(30,077 |
) |
|
|
(78,748 |
) |
|
|
(46,650 |
) |
|
|
(21,107 |
) |
|
|
(2,599 |
) |
Cumulative
effect of change in accounting principle
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
321 |
|
|
|
- |
|
FFO
– Diluted, as defined by NAREIT
|
|
|
150,177 |
|
|
|
137,319 |
|
|
|
137,606 |
|
|
|
126,953 |
|
|
|
131,193 |
|
Loss
from early extinguishment of debt in connection with sale of real
estate
|
|
|
890 |
|
|
|
9,770 |
|
|
|
- |
|
|
|
- |
|
|
|
1,610 |
|
FFO
– Diluted, as adjusted by the Company
|
|
|
151,067 |
|
|
|
147,089 |
|
|
|
137,606 |
|
|
|
126,953 |
|
|
|
132,803 |
|
Reserve(4)
|
|
|
(28,638 |
) |
|
|
(21,559 |
) |
|
|
(21,886 |
) |
|
|
(22,166 |
) |
|
|
(21,783 |
) |
Adjusted
Funds From Operations
|
|
$ |
122,429 |
|
|
$ |
125,530 |
|
|
$ |
115,720 |
|
|
$ |
104,787 |
|
|
$ |
111,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares/units outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
46,520.7 |
|
|
|
47,262.7 |
|
|
|
47,714.3 |
|
|
|
48,675.0 |
|
|
|
45,276.7 |
|
Diluted(a)
|
|
|
47,185.2 |
|
|
|
47,902.4 |
|
|
|
48,411.3 |
|
|
|
49,910.5 |
|
|
|
47,873.8 |
|
FFO
as adjusted by the Company per share diluted (a)
|
|
$ |
3.20 |
|
|
$ |
3.07 |
|
|
$ |
2.84 |
|
|
$ |
2.54 |
|
|
$ |
2.77 |
|
(a) The
calculation of FFO and FFO per share assumes the conversion of dilutive common
stock equivalents and convertible preferred stock. Therefore, the
convertible preferred dividends are added to FFO, and the common stock
equivalent is included in both the basic and diluted weighted average common
shares/units outstanding. The convertible preferred stock had an
anti-dilutive effect in 2004 on the per-share calculation; therefore, the
convertible preferred dividends of $2,194 are not included in FFO for the 2004
diluted calculation. The weighted average common shares/units
outstanding assumes conversion of all UPREIT Units to common
shares. The diluted shares/units for the year ended December 31, 2004
used for Diluted FFO are 49,910.5 instead of the regular diluted shares/units of
49,077.1.
|
(b)
|
Includes
amounts passed through from unconsolidated
investments.
|
|
All
REITs may not be using the same definition for
FFO. Accordingly, the above presentation may not be comparable
to other similarly titled measures of FFO of other
REITs.
|
(4)
|
Adjusted
Funds From Operations is defined as Funds from Operations less an annual
reserve for anticipated recurring, non-revenue generating capitalized
costs ("Reserve") of $760 in 2007 and $525 in 2006, 2005, 2004 and 2003,
per apartment unit (weighted average units owned during the
year). The adjustment from FFO to AFFO only takes into account
this reserve level as previously described. The NAREIT
definition of FFO or AFFO does not take into account any additional costs
of capital improvements and capitalized interest that also are
incurred. The total level of capital improvements and
capitalized interest (including the amount defined as reserve) for the
five years are as follows: 2007 - $105,450; 2006 - $101,723;
2005 - $100,013; 2004 - $102,700; and 2003 -
$106,346.
|
Item
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
Management’s
Discussion and Analysis of Financial Condition and Results of Operations is
intended to facilitate an understanding of the Company’s business and results of
operations. It should be read in conjunction with the Consolidated
Financial Statements, the accompanying Notes to Consolidated Financial
Statements and the selected financial data included elsewhere in this Form
10-K. This Form 10-K, including the following discussion, contains
forward-looking statements regarding future events or trends as described more
fully under “Forward-Looking Statements” on page 54. Actual results
could differ materially from those projected in such statements as a result of
the risk factors described in Item 1A, “Risk Factors,” of this Form
10-K.
The
Company is engaged in the ownership, management, acquisition, rehabilitation and
development of residential apartment communities primarily in selected
Northeast, Mid-Atlantic and Southeast Florida markets. As of December
31, 2007, the Company operated 125 apartment communities with 38,646
apartments. Of this total, the Company owned 123 communities,
consisting of 37,496 apartments, managed as general partner one partnership that
owned 868 apartments, and fee managed one property with 282 apartments for a
third party.
Executive
Summary
The
Company operated during 2006 and 2007 in an improving economic
environment. For historical reference, Home Properties' markets, as
well as the country as a whole, experienced flat job growth for
2003. For 2004, 2005, 2006 and 2007, both the Company’s markets and
the country as a whole experienced positive job growth; 1.0%, 1.1%, 1.2% and
1.0% for the Company, and 1.7%, 1.5%, 1.7% and 0.9% for the country,
respectively. An increase in job growth leads to household
formations, which creates an increase in demand for rental
housing. In addition, during 2006 and continuing through 2007, the
increasing home mortgage interest rate environment and subsequent sub-prime
lending crisis issues made it more challenging for potential residents who
considered making the switch to home ownership. After years of home
ownership being the number one reason our residents give for moving out of our
communities, it dropped down to the number two reason. In 2003, home
purchases represented 19.6% of our move-outs, 19.5% for 2004 and 19.4% in
2005. In 2006 and 2007, we experienced the first significant drop in
years, with the percentage reducing to 18.5% and 15.5%,
respectively. A continued uncertainty in the mortgage lending
industry could push this level down further, which should positively affect our
turnover rates, rental rates and improve occupancy. As referenced in
our Market Demographics table on Page 10 of this report, job growth for our
markets improved in 2007 with 1.0% growth over 2006, on top of the approximate
1.2% growth in 2006 and 1.0% in both 2005 and 2004. This growth
followed negative to flat job growth in 2001 through 2003. As there
is usually a lag between job growth and household formation, this recovery did
not create a measurable increased demand for our apartments until the second
half of 2005, culminating with 2006 Core Properties revenue growth of 5%. This
figure dropped slightly to a healthy 4% Core Property revenue growth for the
year ended 2007.
The
reason for using rent concessions, and the ultimate level of those concessions,
has changed over the past few years. In 2004, we were able to
maintain and improve occupancies while reducing concessions (to 87 basis points
of rent potential) as the economy improved. In 2005, the overall
level of concessions (105 basis points) increased to help soften the much more
aggressive rental increases and significant use of water and sewer expense
recovery which the Company started to pass through to the residents during
2005. The levels of concessions in 2006 (94 basis points) were
affected by two main components – our geographic repositioning efforts and the
utility recovery programs. With the Detroit and Upstate New York
regions sold in 2006 and out of the Core Property pool, concessions reduced as
these were our two weakest markets needing support from
concessions. At the same time, the natural gas portion of the utility
recovery program was rolled out in 2006, leading to significant increases for
the recovery dollars in property other income and increased concession activity
for rents to counteract these aggressive increases. The utility
recovery program rollout was completed in August of 2007. During
2007, the Company has converted to a new property management operating system
that includes a Lease Rent Optimizer that no longer uses concessions to set
market rents. Concessions continued in the legacy operating system
but were phased out during the year upon converting properties to the new
system. Under the new system rents are set to market daily, based on
our available to rent, local supply and demand of units and
pricing.
The Company owned 108 communities with 32,600 apartment units
throughout 2006 and 2007 where comparable operating results are available for
the years presented (the "2007 Core Properties"). Occupancies at the
2007 Core
Properties
increased slightly by 10 basis points, from 94.7% to
94.8%. Occupancies in the fourth quarter of 2007 averaged 94.6%,
compared to 94.4% a year ago. The Company uses a measurement referred
to as Available to Rent, or ATR. This is a leading indicator to
assess future occupancy rates by reference to units which will be available for
rent, based upon leases signed or termination notices received relating to
future move in/move out dates. As of the end of January, 2008, our
ATR was 6.1%, compared to the same time period a year ago when ATR was
6.5%. For 2008, we are projecting physical occupancy averaging 0.1%
better than 2007.
Total
Core Properties rental revenue growth for 2007 was projected to be 3.4%,
consisting of 3.6% in rental rate growth, 0.1% in economic occupancy
improvement, partially offset by a 0.3% increase to
concessions. Actual results were 2.5% in rental rate growth, and 0.1%
decrease in economic occupancy, totaling 2.4% total rental revenue growth, or
1.0% behind the guidance. It is difficult to compare rental growth
without including the utility recovery revenue which is classified as property
other income. The Company recorded $16.6 million of recovery revenue
in 2007 verses only $8.6 million in 2006. Actual results, including
utility recovery revenue, were 4.4% in rental rate growth and 0.1% decrease in
economic occupancy, totaling 4.3% total rental revenue growth including utility
recovery income.
The
guidance for 2008 Core Properties (apartment units owned throughout 2007 and
2008, the "2008 Core Properties") revenue growth is 3.8%. Rental
rates are projected to increase 3.1%, including above-average rental increases
at certain communities resulting from the continued efforts to upgrade the
properties. Economic occupancies are expected to increase 0.2% for
the year, such that rental revenues are projected to increase
3.3%. Property other income is expected to increase substantially
year over year, increasing the 3.3% rental revenue growth to 3.8% total revenue
growth. The item driving the property other income growth is a $3.1
million increase from utility recovery income.
Expenses
for 2008 Core Properties are projected to increase 4.5%. See below
under "Results of Operations" for more details on expense
comparisons.
These
revenue and expense projections result in 2008 Core Properties net operating
income (“NOI”) growth of 3.3% at the mid-point of 2008
guidance. Markets where the Company expects above average NOI growth
include: Philadelphia 5.5%; Baltimore 4.8%; and Washington, D.C.
3.9%. Markets with below average expectations include: Florida and
Boston 2.2%; New York City Metro area 1.6%; Maine 0.8%; and Chicago
-1.1%. Certain historical demographic information for these markets
may be found in the tables on Pages 10 and 11 of this report.
Of the
two items making up NOI – revenue and operating expenses, the revenue component
is likely to be more volatile. The present economy could create
higher demand for rental housing above that projected. An economic
recession that creates little new job growth could put pressure on the Company's
ability to reach the mid-point of guidance. The Company has given FFO
guidance for 2008 with a range of $3.31 to $3.47 per share.
The
Company has anticipated closing on acquisitions of $150 million in its budget
for 2008. The Company is committed to a disciplined approach to
acquisitions, but at the same time recognizes that the continued long term low
interest rate levels allow the Company flexibility to adjust hurdle rates and
bids to reflect market conditions. The Company is also targeting $180
million in dispositions from properties that have reached their
potential.
During
2006 and 2007, the Company continued its stock buy-back activity, repurchasing
approximately 3.9 million shares at a weighted price of approximately $52.00 per
share. The Company's strategy is to opportunistically repurchase
shares at a discount to its underlying NAV, thereby continuing to build value
for shareholders. At the present time, the 2008 guidance assumes $50
million of stock buy-back. The Company will continue to monitor stock
prices, the development pipeline and acquisition alternatives to determine the
current best use of capital between stock buy-back, acquisitions and debt
levels. During periods when our common shares are trading at a
premium, we are not likely to repurchase shares. In such
circumstances, it would be more likely that we would issue equity in order to
raise capital in order to pay down existing debt. This should be
neutral to both NAV and earnings per share, increase the level of unencumbered
assets, and better position the Company to fund future acquisition and
development pipeline needs. During 2008, the Company will target
leverage of approximately 51.3% (equal to the level at year end 2007) of
debt-to-total market capitalization in order to meet its above-described
goals.
Results of Operations
(dollars in thousands, except unit and per unit data)
Comparison of year ended December 31,
2007 to year ended December 31, 2006.
The
Company owned 108 communities with 32,600 apartment units throughout 2006 and
2007 where comparable operating results are available for the years presented
(the "2007 Core Properties"). For the year ended December 31,
2007, the 2007 Core Properties showed an increase in total revenues of 4.0% and
a net operating income increase of 5.0% over the 2006
period. Property level operating expenses increased
2.8%. Average physical occupancy for the 2007 Core Properties
increased from 94.7% to 94.8%, with average monthly rental rates increasing 2.5%
to $1,101 per apartment unit.
A summary
of the 2007 Core Properties NOI is as follows:
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
Rent
|
|
$ |
404,594 |
|
|
$ |
395,140 |
|
|
$ |
9,454 |
|
|
|
2.4 |
% |
Utility
recovery revenue
|
|
|
16,565 |
|
|
|
8,610 |
|
|
|
7,955 |
|
|
|
92.4 |
% |
Rent
including recoveries
|
|
|
421,159 |
|
|
|
403,750 |
|
|
|
17,409 |
|
|
|
4.3 |
% |
Other
income
|
|
|
17,559 |
|
|
|
17,919 |
|
|
|
(360 |
) |
|
|
(2.0 |
%) |
Total
revenue
|
|
|
438,718 |
|
|
|
421,669 |
|
|
|
17,049 |
|
|
|
4.0 |
% |
Operating
and maintenance
|
|
|
(183,738 |
) |
|
|
(178,769 |
) |
|
|
(4,969 |
) |
|
|
(2.8 |
%) |
Net
operating income
|
|
$ |
254,980 |
|
|
$ |
242,900 |
|
|
$ |
12,080 |
|
|
|
5.0 |
% |
NOI may
fall within the definition of "non-GAAP financial measure" set forth in
Regulation S-K and, as a result, Home Properties may be required to include in
this report a statement disclosing the reasons why management believes that
presentation of this measure provides useful information to
investors. Home Properties believes that NOI is helpful to investors
as a supplemental measure of the operating performance of a real estate company
because it is a direct measure of the actual operating results of the Company's
apartment communities. In addition, the apartment communities are
valued and sold in the market by using a multiple of NOI. The Company
also uses this measure to compare its performance to that of its peer
group.
During
2007, the Company acquired/developed a total of 1,625 apartment units in six
communities (the "2007 Acquisition Communities"). In addition, the
Company experienced full-year results for the 3,271 apartment units in ten
apartment communities (the "2006 Acquisition Communities") acquired/developed
during 2006. The inclusion of these acquired communities generally
accounted for the significant changes in operating results for the year ended
December 31, 2007. In addition, the reported income from operations
include the consolidated results of one investment where the Company is the
managing general partner that has been determined to be a Variable Interest
Entity ("VIE").
A summary
of the NOI from continuing operations for the Company as a whole is as
follows:
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
Rent
|
|
$ |
464,324 |
|
|
$ |
408,119 |
|
|
$ |
56,205 |
|
|
|
13.8 |
% |
Utility
recovery revenue
|
|
|
17,965 |
|
|
|
8,668 |
|
|
|
9,297 |
|
|
|
107.3 |
% |
Rent
including recoveries
|
|
|
482,289 |
|
|
|
416,787 |
|
|
|
65,502 |
|
|
|
15.7 |
% |
Other
income
|
|
|
19,812 |
|
|
|
18,209 |
|
|
|
1,603 |
|
|
|
8.8 |
% |
Total
revenue
|
|
|
502,101 |
|
|
|
434,996 |
|
|
|
67,105 |
|
|
|
15.4 |
% |
Operating
and maintenance
|
|
|
(211,126 |
) |
|
|
(184,860 |
) |
|
|
(26,266 |
) |
|
|
(14.2 |
%) |
Net
operating income
|
|
$ |
290,975 |
|
|
$ |
250,136 |
|
|
$ |
40,839 |
|
|
|
16.3 |
% |
During
2007, the Company disposed of five properties with a total of 1,084 units, which
had partial results for 2007 and full year results for 2006 (the "2007 Disposed
Communities"). During 2006, the Company disposed of 39 properties
with a total of 9,705 units, which had partial results for 2006 and full year
results for 2005 (the "2006 Disposed Communities"). The results of
these disposed properties have been reflected in discontinued operations and are
not included in the table above.
For the
year ended December 31, 2007, income from operations (income before minority
interest, and discontinued operations) increased by $5,835 when compared to the
year ended December 31, 2006. The increase was primarily
attributable to the following factors: an increase in rental income
of $56,205 and an increase in property other income of $10,900. These
changes were partially offset by a decrease in interest and other income of
$2,142, an increase in operating and maintenance expense of $26,266, an increase
in general and administrative expense of $787, an increase in interest expense
of $14,648, and an increase in depreciation and amortization of
$17,427. Each of the items are described in more detail
below.
Of the
$65,502 increase in rental income including utility recoveries, $34,671 is
attributable to the 2006 Acquisition Communities, $13,527 is attributable to the
2007 Acquisition Communities partially offset by a $105 decrease attributable to
the consolidation of the VIE. The balance of $17,409 relates to a
4.3% increase from the 2007 Core Properties due primarily to an increase of 2.5%
in weighted average rental rates, accompanied by a decrease in average economic
occupancy from 94.0% to 93.9%, resulting in 2.4% rental growth before utility
recovery revenue. Included in the Core increase is $7,955 which
represents increased utility recovery revenue compared to 2006 attributable to
the Company’s water & sewer, heat, and electric recovery
programs, which were initiated in the second quarter of 2005 and phased in
through the early part of the third quarter of 2007.
In the
current economic environment, it is very difficult to project rental rate and
occupancy results. The Company has provided guidance for 2008, which,
at the mid-point of the range, anticipates Core Properties revenue growth of
3.8%, including utility recovery and above-average rental increases from the
continued efforts to upgrade the properties. Physical occupancy
levels are expected to slightly improve from the level at the end of the fourth
quarter of 2007, producing an expected average for 2008 Core Properties of
94.9%, 10 basis points higher than all of 2007.
The
remaining property other income, which consists primarily of income from
operation of laundry facilities, late charges, administrative fees, garage and
carport rentals, revenue from corporate apartments, cable revenue, pet charges,
and miscellaneous charges to residents, increased in 2007 by
$1,603. Of this increase, $1,314 is attributable to the 2006
Acquisition Communities, $667 is attributable to the 2007 Acquisition
Communities and partially offset by a $360 decrease in the 2007 Core Properties
and an $18 decrease attributable to the VIE. The decrease in the 2007
Core Properties is due to a reduction of corporate apartment
revenue.
Interest
income increased $202 due to a higher level of invested excess cash on hand
available from sale proceeds of the 2006 Disposed Communities and proceeds from
exchangeable senior notes awaiting reinvestment into replacement property, both
occurring in the first quarter of 2007; plus sale proceeds of the 2007 Disposed
Communities occurring in the third and fourth quarters of 2007.
Other
income, which primarily reflects management and other real estate service fees
recognized by the Company, decreased by $2,344. This is primarily due
to a reduction in management fee income resulting from the acquisition of Mount
Vernon Square at the end of 2006, which was previously being managed by the
Company and a decrease in post closing consultation fees earned in connection
with the significant second and fourth quarter 2006 property
dispositions.
Of the
$26,266 increase in operating and maintenance expenses, $14,309 is attributable
to the 2006 Acquisition Communities, $6,809 is attributable to the 2007
Acquisition Communities and a $179 increase attributable to the consolidation of
the VIE. The balance for the 2007 Core Properties, a $4,969 increase
in operating expenses or 2.8%, is primarily a result of increases in personnel,
property insurance, real estate taxes, water & sewer and snow removal
costs. These increases were offset in part by reductions in repairs
& maintenance and gas heating costs.
The
breakdown of operating and maintenance costs for the 2007 Core Properties by
line item is listed below:
|
|
2007
|
|
|
2006
|
|
|
$ Variance
|
|
|
% Variance
|
|
Electricity
|
|
$ |
7,417 |
|
|
$ |
7,130 |
|
|
$ |
(287 |
) |
|
|
(4.0 |
%) |
Gas
|
|
|
19,862 |
|
|
|
20,205 |
|
|
|
343 |
|
|
|
1.7 |
% |
Water
& sewer
|
|
|
12,234 |
|
|
|
11,645 |
|
|
|
(589 |
) |
|
|
(5.1 |
%) |
Repairs
& maintenance
|
|
|
25,300 |
|
|
|
27,034 |
|
|
|
1,734 |
|
|
|
6.4 |
% |
Personnel
expense
|
|
|
40,342 |
|
|
|
37,228 |
|
|
|
(3,114 |
) |
|
|
(8.4 |
%) |
Advertising
|
|
|
4,265 |
|
|
|
4,176 |
|
|
|
(89 |
) |
|
|
(2.1 |
%) |
Legal
& professional
|
|
|
1,362 |
|
|
|
1,224 |
|
|
|
(138 |
) |
|
|
(11.3 |
%) |
Office
& telephone
|
|
|
5,315 |
|
|
|
5,482 |
|
|
|
167 |
|
|
|
3.0 |
% |
Property
insurance
|
|
|
8,973 |
|
|
|
7,076 |
|
|
|
(1,897 |
) |
|
|
(26.8 |
%) |
Real
estate taxes
|
|
|
41,594 |
|
|
|
40,445 |
|
|
|
(1,149 |
) |
|
|
(2.8 |
%) |
Snow
|
|
|
999 |
|
|
|
612 |
|
|
|
(387 |
) |
|
|
(63.2 |
%) |
Trash
|
|
|
2,842 |
|
|
|
2,603 |
|
|
|
(239 |
) |
|
|
(9.2 |
%) |
Property
management G&A
|
|
|
13,233 |
|
|
|
13,909 |
|
|
|
676 |
|
|
|
4.9 |
% |
Total
|
|
$ |
183,738 |
|
|
$ |
178,769 |
|
|
$ |
(4,969 |
) |
|
|
(2.8 |
%) |
Personnel
expenses were up $3,114 or 8.4% over 2006. Of the increase, $1,383 is
reflective of changes in health and workers compensation expense between
periods. In 2007, reserves were increased by $385 as compared to
2006, where we were able to decrease these reserves by $998. The
swing in the reserves between periods reflects the variable nature of health and
workers compensation claims. The balance of the increase in personnel costs
after reserve changes was $1,731, or 4.6%, which includes a 3.1% salary and wage
increase between periods. The guidance for 2008 reflects an increase
of 3.6%.
The
normal increase of property insurance costs was $2,300 or 32.5%, which is due to
a general increase in our property and general liability insurance
coverages. Insurance costs have continued to climb due to catastrophe
rate increases and higher reinsurance rates. The coverage increases
were partially offset by $403 lower self-insurance reserve increases in 2007
over 2006, resulting in a net increase of $1,897, or 26.8% over
2006. The guidance for 2008 reflects an increase of
6.5%.
Real
estate taxes were up $1,149, or 2.8%. The contributing factor was
$555 in refunds received in 2006 from successful tax assessment appeals which
did not occur in the 2007 period. Without the impact of refunds,
taxes would have been up only $594, or 1.5%, which reflects continued efforts in
2007 to reduce assessments. The Company expects real estate taxes to
increase 5.2% in 2008 as additional assessment reductions are not
anticipated, although the Company will continue initiatives to challenge
assessments and obtain cost reductions.
Water
& sewer costs were up $589, or 5.1% from a year ago due to general cost
increases being assessed by local municipalities; however, the water & sewer
recovery program, which became fully phased in during 2006, enables the Company
to recapture much of these cost increases from our residents. The
guidance for 2008 reflects an increase of 5.3%.
Snow
removal costs were up $387 or 63.2%. The year 2006 produced below
normal snowfalls compared to above normal snowfalls in 2007. Snow
removal costs are anticipated to decrease to normal levels in 2008.
The
decrease in repairs and maintenance of $1,734, or 6.4% is mainly attributed to
non-recurring $1,302 reductions in 2007 due to cost reimbursements from fire
losses. After factoring the fire reimbursement, the 2007 decrease was
only $432, or 1.6%, which is due in part to two large properties that were
acquired in late 2005 that required significant work in the early part of 2006
to bring them up to Company standards. This was not repeated in
2007. The Company has provided guidance for 2008 which anticipates a
6.6% increase in repairs and maintenance.
Natural
gas heating costs were down $343, or 1.7%, primarily as a result of having fixed
contracts for our natural gas usage at a lower cost than last
year. For 2007, we had fixed contracts for 93% of our natural gas
usage at a weighted average cost of $8.94 per decatherm. The cost for
2006 was $9.29 per decatherm, or 3.9% higher than experienced this
year. The saving on the commodity coupled with savings realized
through a full year impact of conservation measures implemented during 2006 were
partially offset by a slight increase in consumption during
2007, as
the 2006 period included above average temperatures and the 2007 heating season
was closer to the thirty-year average for degree days.
As of
December 31, 2007, the Company had fixed-price contracts covering
approximately 94% of its natural gas exposure for the balance of the 2007/2008
heating season. Risk is further diversified by staggering contract
term expirations. For the balance of the 2007/2008 heating season,
the Company estimates the average price per decatherm will be approximately
$8.28. For calendar year 2008, where the Company has coverage for 73%
of its exposure, the Company's negotiated average price per decatherm was
approximately $8.36, with an all-in weighted expectation of $8.47 including an
estimate for the 27% variable portion. The Company has
provided guidance for 2008 which anticipates a 5.2% increase in natural gas
heating costs. This is based on the thirty-year average for the
number of degrees days for 2008. Even though the cost per
decatherm is expected to go down slightly, usage is expected to increase to
normal levels. For guidance, the portion of the calendar year not
covered by fixed price contracts (27%) is assumed to be priced at a level that
reflects twelve month strip pricing as of February, 2008.
The
operating expense ratio (the ratio of operating and maintenance expense compared
to rental and property other income) for the 2007 Core Properties was 41.9% and
42.4% for 2007 and 2006, respectively. This 0.5% decrease resulted
from the 4.0% increase in total revenue achieved through ongoing efforts to
upgrade and reposition properties for maximum potential and a full year impact
of the Company's roll out of its heating cost recovery program, which began in
2006; partially offset by the 2.8% increase in operating and maintenance
expense. In general, the Company's operating expense ratio is higher
than that experienced in other parts of the country due to relatively high real
estate taxes and heating costs in its markets.
General
and administrative expenses (“G&A”) increased in 2007 by $787 or 3.5% from
$22,626 in 2006 to $23,413 in 2007. G&A as a percentage of total
revenues (including discontinued operations) were 4.6% for 2007 as compared to
4.4% for 2006. If not for $520 in one-time uncompleted transaction
costs expensed in the third quarter of 2007, the G&A as a percentage of
total revenues would have been 4.5% in 2007. Additionally, the
ramp-up of the development department accounted for a $453
increase. A decrease of $264, or 15.1%, was realized in the external
costs incurred for auditing, tax and consultation expense, including costs to
comply with Section 404 of Sarbanes-Oxley. The Company has
provided guidance for 2008 which anticipates a 4.4% increase in G&A, with
the development department accounting for 38% of the increase.
Interest
expense increased in 2007 by $14,648 as a result of a full year of interest
expense for the 2006 Acquisition Communities, interest expense on the
exchangeable senior notes and the increased borrowings in connection with the
acquisition of the 2007 Acquisition Communities partially offset by lower
interest on the line of credit, and a $2,354 increase in interest capitalized in
connection with development activities. In addition, amortization
from deferred charges relating to the financing of properties totaled $2,929 and
$2,389, and was included in interest expense for 2007 and 2006,
respectively.
Depreciation
and amortization expense increased $17,427 due to the additional depreciation
expense on the 2007 Acquisition Communities and a full year of depreciation
expense for the 2006 Acquisition Communities, as well as the incremental
depreciation on the capital expenditures for additions and improvements to the
Core Properties in 2007 and 2006 of $71,634 and $72,576,
respectively.
Minority
interest increased $1,977 as a direct result of the increase in income from
operations, plus an increase in the minority interest percentage over the prior
year.
Included
in discontinued operations for 2007 are the operating results, net of minority
interest, of the 2007 Disposed Communities. Included in discontinued
operations for 2006 are the operating results, net of minority interest, of the
2007 Disposed Communities and the 2006 Disposed Communities. For
purposes of the discontinued operations presentation, the Company only includes
interest expense and losses from early extinguishment of debt associated with
specific mortgage indebtedness of the properties that are sold or held for
sale.
Included
in the $30,077 gain on disposition of property reported for the year 2007 is the
sale of five apartment communities where the Company has recorded a combined
gross gain on sale of $42,126, net of minority interest of $12,049.
Included
in the $78,748 net gain on disposition of property for 2006 is the sale of 39
apartment communities where the Company recorded a combined gross gain on sale
of $110,514, net of minority interest of $31,766.
Net
income decreased $48,941 primarily due to the decrease in gain on sale of
discontinued operations of $48,671 and a decrease of $4,128 in the income from
discontinued operations in 2007 compared to 2006; partially offset by $3,858
higher income from continuing operations in 2007 compared to 2006.
Comparison of year ended December 31,
2006 to year ended December 31, 2005.
The
Company owned 101 communities with 30,169 apartment units throughout 2005 and
2006 where comparable operating results are available for the years presented
(the "2006 Core Properties"). For the year ended December 31,
2006, the 2006 Core Properties showed an increase in total revenues of 5.1% and
a net operating income increase of 6.8% over the 2005
period. Property level operating expenses increased
2.8%. Average physical occupancy for the 2006 Core Properties
increased from 94.4% to 94.8%, with average monthly rental rates increasing 3.2%
to $1,073 per apartment unit.
A summary
of the 2006 Core Properties NOI is as follows:
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
Rent
|
|
$ |
365,419 |
|
|
$ |
353,259 |
|
|
$ |
12,160 |
|
|
|
3.4 |
% |
Utility
recovery revenue
|
|
|
7,868 |
|
|
|
2,792 |
|
|
|
5,076 |
|
|
|
181.8 |
% |
Rent
including recoveries
|
|
|
373,287 |
|
|
|
356,051 |
|
|
|
17,236 |
|
|
|
4.8 |
% |
Other
income
|
|
|
17,268 |
|
|
|
15,696 |
|
|
|
1,572 |
|
|
|
10.0 |
% |
Total
revenue
|
|
|
390,555 |
|
|
|
371,747 |
|
|
|
18,808 |
|
|
|
5.1 |
% |
Operating
and maintenance
|
|
|
(166,335 |
) |
|
|
(161,870 |
) |
|
|
(4,465 |
) |
|
|
(2.8 |
%) |
Net
operating income
|
|
$ |
224,220 |
|
|
$ |
209,877 |
|
|
$ |
14,343 |
|
|
|
6.8 |
% |
During
2006, the Company acquired/developed a total of 3,271 apartment units in ten
communities (the "2006 Acquisition Communities"). In addition, the
Company experienced full-year results for the 2,430 apartment units in seven
apartment communities (the "2005 Acquisition Communities") acquired during
2005. The inclusion of these acquired communities generally accounted
for the significant changes in operating results for the year ended December 31,
2006. In addition, the reported income from operations include the
consolidated results of one investment where the Company is the managing general
partner that has been determined to be a Variable Interest Entity
("VIE").
A summary
of the NOI from continuing operations for the Company as a whole is as
follows:
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
Rent
|
|
$ |
408,119 |
|
|
$ |
365,854 |
|
|
$ |
42,265 |
|
|
|
11.6 |
% |
Utility
recovery revenue
|
|
|
8,668 |
|
|
|
2,852 |
|
|
|
5,816 |
|
|
|
203.9 |
% |
Rent
including recoveries
|
|
|
416,787 |
|
|
|
368,706 |
|
|
|
48,081 |
|
|
|
13.0 |
% |
Other
income
|
|
|
18,209 |
|
|
|
16,052 |
|
|
|
2,157 |
|
|
|
13.4 |
% |
Total
revenue
|
|
|
434,996 |
|
|
|
384,758 |
|
|
|
50,238 |
|
|
|
13.1 |
% |
Operating
and maintenance
|
|
|
(184,860 |
) |
|
|
(169,015 |
) |
|
|
(15,845 |
) |
|
|
(9.4 |
%) |
Net
operating income
|
|
$ |
250,136 |
|
|
$ |
215,743 |
|
|
$ |
34,393 |
|
|
|
15.9 |
% |
During
2005, the Company sold four properties with a total of 816 units, which had
partial results for 2005 (the "2005 Disposed Communities"). The results of the
2005 Disposed Communities, along with the 2007 and 2006 Disposed Communities,
have been reflected in discontinued operations and are not included in the table
above.
For the
year ended December 31, 2006, income from operations (income before minority
interest and discontinued operations) increased by $5,011 when compared to the
year ended December 31, 2005. The increase was primarily
attributable to the following factors: an increase in rental income
of $42,265, an increase in property other income of $7,973, an increase in
interest and other income of $2,625, and a decrease in impairment of assets held
as general partner of $400. These changes were partially offset by an
increase in operating and maintenance expense of $15,845, an increase in general
and administrative expense of $2,974, an increase in interest expense of
$14,656, and an increase in depreciation and amortization of
$14,777. Each of the items are described in more detail
below.
Of the
$42,265 increase in rental income, $21,578 is attributable to the 2005
Acquisition Communities, $8,228 is attributable to the 2006 Acquisition
Communities and $299 is attributable to the consolidation of the
VIE. The balance of $12,160 relates to a 3.4% increase from the 2006
Core Properties due primarily to an increase of 3.2% in weighted average rental
rates, accompanied by an increase in average physical occupancy from 94.4% to
94.8%.
Property
other income, which consists primarily of income from utility recovery charges,
operation of laundry facilities, late charges, administrative fees, garage and
carport rentals, revenue from corporate apartments, cable revenue, pet charges,
and miscellaneous charges to residents, increased in 2006 by
$7,973. Of this increase, $1,097 is attributable to the 2005
Acquisition Communities, $259 is attributable to the 2006 Acquisition
Communities and partially offset by a $31 decrease attributable to the
VIE. The balance of $6,648 represents a 36.0% increase attributable
to the 2006 Core Properties. Included in the 2006 Core Properties
increase is $5,076, which represents increased utility recovery revenue compared
to 2005.
Interest
income increased $1,180 due to a higher level of invested excess cash on hand
available from sale proceeds of the 2006 Disposed Communities and proceeds from
exchangeable senior notes awaiting reinvestment into replacement
property.
Other
income, which primarily reflects management and other real estate service fees
recognized by the Company, increased in 2006 by $1,445. This is due
primarily to the post closing consultation fees earned in connection with the
2006 Disposed Communities.
Of the
$15,845 increase in operating and maintenance expenses, $8,521 is attributable
to the 2005 Acquisition Communities, $2,969 is attributable to the 2006
Acquisition Communities partially offset by a $173 decrease attributable to the
VIE. The balance for the 2006 Core Properties, a $4,465 increase in
operating expenses or 2.8%, is primarily a result of increases in gas heating
costs, repairs & maintenance and property insurance. These
increases were offset in part by reductions in personnel, advertising, and snow
removal costs.
The
breakdown of operating and maintenance costs for the 2006 Core Properties by
line item is listed below:
|
|
2006
|
|
|
2005
|
|
|
$ Variance
|
|
|
% Variance
|
|
Electricity
|
|
$ |
6,812 |
|
|
$ |
6,271 |
|
|
$ |
(541 |
) |
|
|
(8.6 |
%) |
Gas
|
|
|
19,281 |
|
|
|
18,045 |
|
|
|
(1,236 |
) |
|
|
(6.8 |
%) |
Water
& sewer
|
|
|
10,814 |
|
|
|
10,154 |
|
|
|
(660 |
) |
|
|
(6.5 |
%) |
Repairs
& maintenance
|
|
|
24,761 |
|
|
|
23,589 |
|
|
|
(1,172 |
) |
|
|
(5.0 |
%) |
Personnel
expense
|
|
|
34,530 |
|
|
|
35,132 |
|
|
|
602 |
|
|
|
1.7 |
% |
Advertising
|
|
|
3,974 |
|
|
|
4,386 |
|
|
|
412 |
|
|
|
9.4 |
% |
Legal
& professional
|
|
|
1,100 |
|
|
|
841 |
|
|
|
(259 |
) |
|
|
(30.8 |
%) |
Office
& telephone
|
|
|
5,199 |
|
|
|
5,307 |
|
|
|
108 |
|
|
|
2.0 |
% |
Property
insurance
|
|
|
6,613 |
|
|
|
5,559 |
|
|
|
(1,054 |
) |
|
|
(19.0 |
%) |
Real
estate taxes
|
|
|
37,453 |
|
|
|
37,277 |
|
|
|
(176 |
) |
|
|
(0.5 |
%) |
Snow
|
|
|
588 |
|
|
|
1,166 |
|
|
|
578 |
|
|
|
49.6 |
% |
Trash
|
|
|
2,349 |
|
|
|
2,381 |
|
|
|
32 |
|
|
|
1.3 |
% |
Property
management G&A
|
|
|
12,861 |
|
|
|
11,762 |
|
|
|
(1,099 |
) |
|
|
(9.3 |
%) |
Total
|
|
$ |
166,335 |
|
|
$ |
161,870 |
|
|
$ |
(4,465 |
) |
|
|
(2.8 |
%) |
With a
$1,236 increase, natural gas heating costs were up 6.8% over 2005 reflecting
significant increases in the cost of natural gas per decatherm. For
calendar year 2006, the Company's average price per decatherm was
$9.29. A year ago, the average commodity cost for the year was
$6.98. Both the winter of the first quarter and fourth quarter of
2006 were mild, partially offsetting the 33% increase in commodity
cost.
The
increase in repairs and maintenance of $1,172, or 5.0%, is mainly attributed to
a non-recurring $618 reduction in 2005 due to cost reimbursements from fire
losses. After factoring the fire reimbursement, the 2006 increase was
only $554, or 2.3%.
Personnel
expenses were down $602, or 1.7% in 2006 versus 2005. The Company
experienced favorable variances in workers compensation and health insurance,
which were down $322, or 10%. As with heating costs described above,
the more mild winter in 2006 produced lower snowfall which reduces labor
costs.
Advertising
costs were down $412, or 9.4%, as a result of property management decreasing
spending on major newspaper ads and focusing instead on internet advertising and
resident referral programs.
Legal and
professional fees were up $259, or 30.8%, due in part to increased efforts for
property tax assessment appeals.
Property
insurance costs were up $1,054, or 19.0% over 2005, primarily due to a general
increase in our property and general liability insurance
premiums. Insurance costs have continued to climb due to catastrophe
rate increases and higher reinsurance rates.
Real
estate taxes were up only $176, or 0.5% in 2006, reflecting general increased
assessments and rates as tax authorities struggle to raise revenues in many
regions of the country, mostly offset by selected successful property tax
appeals which resulted in $555 savings in 2006.
Snow
removal costs were down $578 or 49.6%. The year 2006 produced below
normal snowfalls compared to normal snowfall in 2005.
The
operating expense ratio (the ratio of operating and maintenance expense compared
to rental and property other income) for the 2006 Core Properties was 42.6% and
43.5% for 2006 and 2005, respectively. This 0.9% decrease resulted
from the 5.1% increase in total revenue achieved through ongoing efforts to
upgrade and reposition properties for maximum potential and the Company's roll
out of its heating cost recovery program in 2006, offset by the 2.8% increase in
operating and maintenance expense. In general, the Company's
operating expense ratio is higher than that experienced in other parts of the
country due to relatively high real estate taxes and heating costs in its
markets.
General
and administrative expenses (“G&A”) increased in 2006 by $2,974 or 15% from
$19,652 in 2005 to $22,626 in 2006. G&A as a percentage of total
revenues (including discontinued operations) were 4.4% for 2006 as compared to
4.0% for 2005. The accounting rules effecting stock options and
restricted stock enacted in 2006, SFAS 123R, required the Company to recognize
compensation costs in 2006 for retirement-eligible and near-retirement-eligible
employees and directors over a shorter vesting period than 2005, coupled with a
significantly higher stock price, resulting in $879 higher expense for
2006. Part of the increase, $1,667, is the direct result of the
increase in corporate incentive compensation bonus accrued in 2006, partially
offset by a $1,331 reduction in external costs incurred for auditing, tax and
consultation expense, including costs to comply with Section 404 of
Sarbanes-Oxley. G&A for 2006 also included $505 for the
development department which was non-existent in 2005. A significant
portion of the costs in 2005 related to the non-recurring first year efforts for
Section 404 compliance.
Interest
expense increased in 2006 by $14,656 as a result of a full year of interest
expense for the 2005 Acquisition Communities, the increased borrowings in
connection with acquisition of the 2006 Acquisition Communities and interest
expense on the exchangeable senior notes, partially offset by lower interest on
line of credit expenses. In addition, amortization from deferred charges relating
to the financing of properties totaled $2,389 and $1,975, and was included in
interest expense for 2006 and 2005, respectively.
Included
in 2005 interest expense are prepayment penalties of $147 in connection with the
refinancing or payoff of certain mortgages not in connection with a sale of any
property.
Depreciation and
amortization expense increased $14,777 due to the additional depreciation
expense on the 2006 Acquisition Communities and a full year of depreciation
expense for the 2005 Acquisition Communities, as well as
the
incremental depreciation on the capital expenditures for additions and
improvements to the Core Properties in 2006 and 2005 of $64,000 and $67,276,
respectively.
The
Company has sold virtually all of the assets associated with its general partner
interests in the affordable properties in order to focus solely on the direct
ownership and management of market rate apartment communities. During
2005, the Company recorded impairment charges of $400, which pertains to an
impairment charge taken on the one remaining VIE to reduce its investment to
fair market value.
Minority
interest increased $995 as a direct result of the increase in income from
operations, partially offset by a decrease in the minority interest percentage
over the prior year.
Included
in discontinued operations for 2006 are the operating results, net of minority
interest, of the 2007 and 2006 Disposed Communities. Included in
discontinued operations for 2005 are the operating results, net of minority
interest, of the 2007, 2006 and 2005 Disposed Communities. For
purposes of the discontinued operations presentation, the Company only includes
interest expense and losses from early extinguishment of debt associated with
specific mortgage indebtedness of the properties that are sold or held for
sale.
Included
in the $78,748 net gain on disposition of property for 2006 is the sale of 39
apartment communities where the Company recorded a combined gross gain on sale
of $110,514, net of minority interest of $31,766.
Included
in the $53,975 gain on disposition of property reported for the year 2005 is the
sale of four apartment communities where the Company has recorded a combined
gross gain on sale of $73,022, net of minority interest of
$24,227. In addition, the Company recorded a $7,686 gain, net of
minority interest of $2,506, during the year related to the disposal of two
affordable partnerships.
Net
income increased $28,973 primarily due to the increase in gain on sale of
discontinued operations of $24,773 in 2006 compared to 2005; plus $4,016 higher
income from continuing operations in 2006 compared to 2005.
Liquidity and Capital
Resources
The
Company's principal liquidity demands are expected to be distributions to the
common stockholders and holders of UPREIT Units, capital improvements and
repairs and maintenance for the properties, acquisition and development of
additional properties, debt repayments and stock repurchases. The
Company may also acquire equity ownership in other public or private companies
that own and manage portfolios of apartment communities. Management
anticipates the acquisition of communities of approximately $150 million in
2008, although there can be no assurance that additional acquisitions will
actually occur.
The
Company intends to meet its short-term liquidity requirements through net cash
flows provided by operating activities and its existing bank line of credit,
described below. The Company considers its ability to generate cash
to be adequate to meet all operating requirements, including availability to pay
dividends to its stockholders and make distributions to its Unitholders in
accordance with the provisions of the Internal Revenue Code, as amended,
applicable to REITs.
As of
December 31, 2007, the Company had an unsecured line of credit agreement with
M&T Bank of $140 million which expires September 1, 2008 and can be extended
one year upon satisfaction of certain conditions. The Company has had
no occurrences of default through December 31, 2007. The Company had
$2.5 million outstanding as of December 31, 2007. Borrowings under
the line of credit bear interest at 0.75% over the one-month LIBOR rate of 4.60%
at December 31, 2007. Accordingly, increases in interest rates will
increase the Company's interest expense and as a result will affect the
Company's results of operations and financial condition.
The
Company plans to explore increasing substantially the level of the
line of credit above the current $140 million limit either later in 2008 or
2009. The Company has been very successful in increasing the
percentage of unencumbered assets of the total property pool. At the
end of 2006, unencumbered assets were 11% of the property
portfolio. At the end of 2007, this had grown to over
16%. Based on projection of activity during 2008, the Company
estimates that this level will grow to over 21% by year-end
2008. This higher level adds flexibility as the unencumbered pool is
estimated by year-end 2008 to support unsecured borrowing in excess of a half
billion dollars, compared to outstanding unsecured debt at year-end 2007 of
$202.5 million.
To the
extent that the Company does not satisfy its long-term liquidity requirements
through net cash flows provided by operating activities and its unsecured credit
facility, it intends to satisfy such requirements through property debt
financing, proceeds from the sale of properties, the issuance of UPREIT Units,
proceeds from its Dividend Reinvestment and Direct Stock Purchase Plan ("DRIP"),
or the issuance of additional debt and equity securities. At December
31, 2007, the Company owned 27 properties with 5,812 apartment units which were
unencumbered by debt.
On April
4, 2007, the Company filed a Form S-3 universal shelf registration statement
with the SEC that registers the issuance, from time to time, of common stock,
preferred stock or debt securities. The Company may offer and sell
securities issued pursuant to the universal shelf registration statement after a
prospectus supplement, describing the type of security and amount being offered,
is filed with the SEC.
During
2007, the Company sold five communities, with a total of 1,084 units, for $129.5
million. A gain on sale of approximately $42.1 million, before the
allocation of minority interest, was realized from these sales. The
weighted average first year capitalization rate projected on these dispositions
is 5.9%.
Management
has included in its operating plan that the Company will strategically dispose
of assets totaling approximately $180 million in 2008, $65 million of
which were closed during the first two months of 2008, although there can be no
assurance that additional dispositions will actually occur.
During
2006, the Company sold 39 communities for a total sales price of $495.3
million. The Company was able to sell these properties at an average
capitalization rate of 7.6% and reinvest in the acquisition of properties with
more growth potential at an expected first year cap rate of 6.4%.
The
issuance of UPREIT Units for property acquisitions continues to be a source of
capital for the Company. During 2007, the Company issued
$36.3 million in 634,863 UPREIT Units as partial consideration for three
acquired properties. During 2006, the Company issued $20.4 million in
343,393 UPREIT Units as partial consideration for two acquired
properties.
The
Company’s DRIP provides the stockholders of the Company an opportunity to
automatically invest their cash dividends in additional shares of common
stock. In addition, eligible participants may make monthly payments
or other voluntary cash investments in shares of common stock. The
maximum monthly investment permitted without prior Company approval is currently
$10,000. The Company meets share demand under the DRIP through share
repurchases by the transfer agent in the open market on the Company's behalf or
new share issuance. From January 1, 2006 through December 26, 2006,
the Company met demand through share repurchases by the transfer agent in the
open market on the Company's behalf. From December 27, 2006 through
September 25, 2007, the Company met demand by issuing new shares. As
of September 26, 2007, the Company switched to meeting demand through share
repurchases by the transfer agent in the open market on the Company's
behalf.
Management
monitors the relationship between the Company's stock price and its estimated
NAV. During times when the difference between these two values is
small, resulting in little "dilution" of NAV by common stock issuances, the
Company can choose to issue new shares. At times when the gap between
NAV and stock price is greater, the Company has the flexibility to satisfy the
demand for DRIP shares with stock repurchased in the open market. In
addition, the Company can issue waivers to DRIP participants to provide for
investments in excess of the $10,000 maximum monthly investment. No
such waivers were granted during 2007 or 2006.
In
October 2006, the Company issued $200 million of exchangeable senior notes with
a coupon rate of 4.125%, which generated net proceeds of $195.8
million. The net proceeds were used to repurchase 933,000 shares of
common stock for a total of $58 million, pay down $70 million on the line of
credit, with the balance used for redemption of the Series F Preferred
Shares and property acquisitions. The exchange terms and conditions
are more fully described under “Contractual Obligations and Other Commitments”,
below.
In
March 2002, the Company issued 2,400,000 shares of its 9.00% Series F Cumulative
Redeemable Preferred Stock ("Series F Preferred Shares"), with a $25.00
liquidation preference per share. This offering generated net
proceeds of approximately $58.1 million. The net proceeds were used
to fund the Series B preferred stock repurchase, property acquisitions, and
property upgrades. Each Series F Preferred share received an annual
dividend equal to 9.00% of the liquidation preference per share (equivalent to a
fixed annual amount of $2.25 per share). The Series F
Preferred
Shares were redeemed by the Company on March 26, 2007 at a redemption price of
$25.00 per share, plus accrued and unpaid dividends of $0.4
million. In accordance with the SEC’s clarification of EITF
Abstracts, Topic No. D-42, The
Effect on the Calculation of Earnings per Share for the Redemption or Induced
Conversion of Preferred Stock, the initial offering costs of $1.9 million
associated with the issuance of the Series F Preferred Shares were written-off
in the first quarter of 2007, and are reflected as a reduction of net income
available to common stockholders in determining earnings per share for the year
ended December 31, 2007.
In 1997,
the Company’s Board of Directors approved a stock repurchase program under which
the Company may repurchase shares of its common stock or UPREIT Units (“Company
Program”). The shares/units may be repurchased through open market or
privately negotiated transactions at the discretion of Company
management. The Board's action did not establish a target stock price
or a specific timetable for repurchase. At December 31, 2005, there
was approval remaining to purchase 3,220,195 shares. During 2006, the
Company repurchased 2,613,747 shares of its outstanding common stock at a cost
of $142.5 million at a weighted average price of $54.53 per share. On
October 27, 2006, the Board of Directors approved an additional 2,000,000-share
increase in the stock repurchase program. During 2007, the Company
repurchased 1,243,700 shares of its outstanding common stock at a cost of $58.3
million at a weighted average price of $46.86 per share, resulting in a
remaining authorization level of 1,362,748 shares as of December 31,
2007. The Company will continue to monitor stock prices, the net
asset value, and acquisition/development alternatives to determine the current
best use of capital between the two major uses of capital – stock buybacks and
acquisitions/development. At the present time, the 2008 guidance
assumes $50 million of stock buy-back.
In 2000,
the Company obtained an investment grade rating from Fitch, Inc. The
rating in effect at December 31, 2007 (no change from initial rating) is a
corporate credit rating of "BBB" (Triple-B).
As of
December 31, 2007, the weighted average rate of interest on the Company’s total
indebtedness of $2.2 billion was 5.6% with staggered maturities averaging
approximately seven and two-thirds years. Approximately 99% of total
indebtedness is at fixed rates. This limits the exposure to changes
in interest rates, minimizing the effect of interest rate fluctuations on the
Company's results of operations and cash flows.
The
Company's net cash flow from operating activities decreased from $163 million in
2006, to $162 million in 2007. The small decrease was principally due
to improved operating performance of the 2007 Core Properties offset by changes
in accounts payable and accrued liabilities, cash held in escrow and other
assets. The decreases in cash held in escrows and accounts payable
were due to normal timing differences in accounts payable and real estate tax
payments and lower accrued liabilities were due to lower accrued bonuses in 2007
as compared to 2006. The decrease in other assets was principally due
to the use of funds that were on deposit in 2006 for the acquisition of
properties that closed in 2007.
Cash
flows from investing activities changed from net cash provided of $160 million
in 2006 to cash used of $88 million in 2007. The significant change
of $248 million between years is attributable to the unusually high $488 million
proceeds from 2006 Disposed Communities as compared to a more typical $127
million proceeds from the 2007 Disposed Communities. In 2006 funds
from 2006 Disposed Communities were added to escrow of $39 million compared to
the withdrawal of $42 million in 2007 used for 2007 Acquisition
Communities.
Cash
flows used in financing activities were $210 million in 2006 compared to $187
million in 2007. The lower use of cash in 2007 was due to $85 million
lower common stock buybacks, $84 million lower paydowns on the line of credit,
combined with $123 million more cash provided by mortgage financings, offset by
$17 million lower proceeds from stock option exercises, the redemption of the
Series F preferred stock for $60 million in 2007 and the exchangeable senior
notes in 2006 which generated net proceeds of $196 million.
On
February 11, 2008, the Board of Directors declared a dividend of $0.66 per share
for the quarter ended December 31, 2007. This is the equivalent
of an annual distribution of $2.64 per share. The dividend is payable
February 29, 2008 to shareholders of record on February 22, 2008.
Critical Accounting
Policies (dollars in thousands, except unit and per unit
data)
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions in certain circumstances that
affect
amounts
reported in the accompanying consolidated financial statements and related
notes. In preparing these financial statements, management has
utilized information available including industry practice and its own past
history in forming its estimates and judgments of certain amounts included in
the financial statements, giving due consideration to materiality. It
is possible that the ultimate outcome as anticipated by management in
formulating its estimates inherent in these financial statements may not
materialize. However, application of the accounting policies below
involves the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from these
estimates. In addition, other companies may utilize different
estimates which may impact comparability of the Company's results of operations
to those of companies in similar businesses.
Revenue
Recognition
The
Operating Partnership leases its residential apartment units under leases with
terms generally one year or less. Rental income is recognized on a
straight-line basis over the related lease term. As a result,
deferred rents receivable are created when rental income is recognized during
the concession period of certain negotiated leases and amortized over the
remaining term of the lease. In accordance with SFAS No. 141, Business Combinations (“SFAS
141”), the Company recognizes rental revenue of acquired in-place "above and
below" market leases at their fair value over the weighted average remaining
lease term. Property other income, which consists primarily of income from
operation of laundry facilities, utility recovery, administrative fees, garage
and carport rentals and miscellaneous charges to residents, is recognized when
earned (when the services are provided, or when the resident incurs the
charge).
Property
management fees are recognized when earned based on a contractual percentage of
net monthly cash collected on rental income.
Real
Estate
Real
estate is recorded at cost. Costs related to the acquisition,
development, construction and improvement of properties are
capitalized. Recurring capital replacements typically include
carpeting and tile, appliances, HVAC equipment, new roofs, site improvements and
various exterior building improvements. Non-recurring upgrades
include, among other items, community centers, new appliances, new windows,
kitchens and bathrooms. Interest costs are capitalized until
construction is substantially complete. There was $3,441, $1,087 and
$1,096 of interest capitalized in 2007, 2006 and 2005,
respectively. Salaries and related costs capitalized for 2007, 2006
and 2005 were $1,967, $2,097 and $2,135, respectively. When retired
or otherwise disposed of, the related asset cost and accumulated depreciation
are cleared from the respective accounts and the net difference, less any amount
realized from disposition, is reflected in income. Ordinary repairs
and maintenance that do not extend the life of the asset are expensed as
incurred.
Management
reviews its long-lived assets used in operations for impairment when, in
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long Lived Assets (“SFAS 144”), there is an event or change
in circumstances that indicates an impairment in value. An asset is
considered impaired when the undiscounted future cash flows are not sufficient
to recover the asset's carrying value. If such impairment is present,
an impairment loss is recognized based on the excess of the carrying amount of
the asset over its fair value. The Company records impairment losses
and reduces the carrying amounts of assets held for sale when the carrying
amounts exceed the estimated selling proceeds less the costs to
sell.
The
Company accounts for its acquisitions of investments in real estate in
accordance with SFAS 141, which requires the fair value of the real estate
acquired to be allocated to the acquired tangible assets, consisting of land,
building, and personal property and identified intangible assets and
liabilities, consisting of the value of above market
and below-market leases, value of in-place leases and value of resident
relationships, based in each case on their fair values. The Company
considers acquisitions of operating real estate assets to be businesses as that
term is defined in Emerging Issues Task Force Issue No. 98-3, Determining Whether a Nonmonetary
Transaction Involves Receipt of Productive Assets or of a
Business.
The
Company allocates purchase price to the fair value of the tangible assets of an
acquired property (which includes the land, building, and personal property)
determined by valuing the property as if it were vacant. The
as-if-vacant value is allocated to land, buildings, and personal property based
on management's determination of the relative fair values of these
assets.
Above-market
and below-market in-place lease values for acquired properties are recorded
based on the present value (using an interest rate which reflects the risks
associated with the leases acquired) of the difference between (i) the
contractual amounts to be paid pursuant to the in-place leases and (ii)
management's estimate of fair market lease rates for the corresponding in-place
leases, measured over a period equal to the remaining non-cancelable term of the
lease. The capitalized above-market lease values are included in
other assets and are amortized as a reduction of rental income over the
remaining non-cancelable terms of the respective leases. The
capitalized below-market lease values are included in accrued expenses and other
liabilities and are amortized as an increase to rental income over the initial
term of the respective leases.
Other
intangible assets acquired include amounts for in-place lease values that are
based upon the Company's evaluation of the specific characteristics of the
leases. Factors considered in these analyses include an estimate of
carrying costs during hypothetical expected lease-up periods considering current
market conditions, and costs to execute similar leases. The Company
also considers information obtained about each property as a result of its
pre-acquisition due diligence, marketing and leasing activities in estimating
the fair value of the tangible and intangible assets acquired. In
estimating carrying costs, management also includes real estate taxes, insurance
and other operating expenses and estimates of lost rentals at market rates
during the expected lease-up periods depending on the property
acquired.
The total
amount of other intangible assets acquired is further allocated to resident
relationships, which includes intangible values based on management's evaluation
of the specific characteristics of the residential leases and the Company's
resident retention history.
The value
of in-place leases and resident relationships are amortized and included in
depreciation and amortization expense over the initial term of the respective
leases.
The
acquisitions of minority interests for shares of the Company's common stock are
recorded under the purchase method with assets acquired reflected at the fair
market value of the Company's common stock on the date of
acquisition. The acquisition amounts are allocated to the underlying
assets based on their estimated fair values. There were 478,318 and
3,769,733 shares of UPREIT Units converted to common stock, during 2007 and
2006, respectively. The Company made adjustments in the amount of
$16,475 and $124,631, during 2007 and 2006, respectively, to record the fair
market value of the conversions.
Discontinued
Operations
The
Company reports its property dispositions as discontinued operations as
prescribed by the provisions of SFAS 144. Pursuant to the definition
of a component of an entity in SFAS 144, assuming no significant continuing
involvement by the former owner after the sale, the sale of an apartment
community is considered a discontinued operation. In addition,
apartment communities classified as held for sale are also considered a
discontinued operation. The Company generally considers assets to be
held for sale when all significant contingencies surrounding the closing have
been resolved, which often corresponds with the actual closing
date.
Included
in discontinued operations for the three years ended December 31, 2007 are the
operating results, net of minority interest, of 48 apartment community
dispositions (5 sold in 2007, 39 sold in 2006 and 4 sold in 2005). In
addition, discontinued operations for the year ended December 31, 2005 includes
the operating results of four VIEs sold during 2005. For purposes of
the discontinued operations presentation, the Company only includes interest
expense
associated with specific mortgage indebtedness of the properties that are
considered discontinued operations.
Capital
Improvements
The
Company has a policy to capitalize costs related to the acquisition,
development, rehabilitation, construction, and improvement of
properties. Capital improvements are costs that increase the value
and extend the useful life of an asset. Ordinary repair and
maintenance costs that do not extend the useful life of the asset are expensed
as incurred. Costs incurred on a lease turnover due to normal wear
and tear by the resident are expensed on the turn. Recurring capital
improvements typically include: appliances, carpeting and flooring, HVAC
equipment, kitchen/bath cabinets, new roofs, site improvements and various
exterior building improvements. Non-recurring upgrades include, among
other items: community centers, new windows, and kitchen/bath
apartment upgrades. The
Company
capitalizes interest and certain internal personnel costs related to the
communities under rehabilitation and construction.
The
Company is required to make subjective assessments as to the useful lives of its
properties and improvements for purposes of determining the amount of
depreciation to reflect on an annual basis. These assessments have a
direct impact on the Company's net income.
Federal
Income Taxes
The
Company has elected to be taxed as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, as amended, commencing with the taxable year
ended December 31, 1994. As a result, the Company generally is not subject
to Federal or State income taxation at the corporate level to the extent it
distributes annually at least 90% of its REIT taxable income to its shareholders
and satisfies certain other requirements. For the years ended
December 31, 2007, 2006 and 2005, the Company distributed in excess of 100% of
its taxable income; accordingly, no provision has been made for federal income
taxes in the accompanying consolidated financial
statements. Stockholders of the Company are taxed on dividends and
must report distributions from the Company as either ordinary income, capital
gains, or as return of capital.
Included
in total assets on the Consolidated Balance Sheets are deferred tax assets of
$10,149 and $10,079 as of December 31, 2007 and 2006,
respectively. The deferred tax assets were a result of the net losses
associated with the affordable property portfolio sales during 2004 and
2003. Management does not believe it is more likely than not that
these deferred assets will be used, and accordingly has recorded a reserve
against the deferred tax assets of $10,149 and $10,078 for the years ended
December 31, 2007 and 2006, respectively. The deferred tax assets are
associated with HPRS who performs certain of the residential and development
activities of the Company. HPRS historically provided commercial
management services and provided loan advances to affordable housing entities
owned through general partnership interests. As these activities are
no longer provided, Management does not currently believe there is a source for
future material taxable earnings for HPRS that would give rise to value for the
deferred tax assets.
Variable Interest
Entities
Effective
March 31, 2004, the Company adopted FASB Interpretation No. 46R, Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51 – Consolidated Financial
Statements. The interpretation addresses consolidation by
businesses of special purpose entities (variable interest entities,
"VIE").
The
Company is currently the general partner in one VIE with a total of 868 units
syndicated using low income housing tax credits under Section 42 of the Internal
Revenue Code. As general partner, the Company manages the day-to-day
operations of this partnership for a management fee. In addition, the
Company has certain operating deficit and tax credit guarantees to its limited
partner. The Company is responsible for funding operating deficits to
the extent there are any and can receive operating incentive awards if cash
flows reach certain levels. The effect on the consolidated balance
sheets of including this VIE as of December 31, 2007 and 2006 includes total
assets of $19,241 and $20,473, total liabilities of $17,703 and $17,892, and
minority interest of $1,538 and $2,581, respectively. The VIE is
included in the Consolidated Statement of Operations for the years ended
December 31, 2007, 2006 and 2005.
Acquisitions and
Dispositions (dollars in thousands, except unit and per unit
data)
In 2007,
the Company acquired a total of five communities with a total of 1,541 units for
total consideration of $161,500, or an average of approximately $104,800 per
unit. For the same time period, the Company sold five properties with
a total of 1,084 units for total consideration of $129,500, or an average of
$119,500 per unit. The weighted average expected first year cap rate
of the 2007 Acquisition Communities was 5.9% and of the 2007 Disposed
Communities was 5.9%. The weighted average unleveraged IRR during the
Company's ownership for the properties sold was 12.0%.
In 2006,
the Company acquired a total of eight communities with a total of 3,067 units
for total consideration of $360,100, or an average of approximately $117,400 per
unit. For the same time period, the Company sold 39 properties with a
total of 9,705 units for total consideration of $495,300, or an average of
approximately $51,000 per
unit. The
weighted average expected first year cap rate of the 2006 Acquisition
Communities was 6.7% and of the 2006 Disposed Communities was
7.6%. The weighted average unleveraged IRR during the Company's
ownership for the properties sold was 9.3%.
Contractual Obligations and
Other Commitments
The
primary obligations of the Company relate to its borrowings under the line of
credit, exchangeable senior notes and mortgage notes payable. The
Company’s line of credit matures in September 2008, and had $2.5 million
outstanding at December 31, 2007. The $2.0 billion in mortgage
notes payable have varying maturities ranging from 1 to 34 years. The
principal payments on the mortgage notes payable for the years subsequent to
December 31, 2007, are set forth in the table below as "Long-term
debt."
In
October 2006, the Company issued $200 million of exchangeable senior notes with
a coupon rate of 4.125%. The notes are exchangeable into cash equal
to the principal amount of the notes and, at the Company’s option, cash or
common stock for the exchange value, to the extent that the market price of
common stock exceeds the initial exchange price of $73.34 per share, subject to
adjustment. The adjusted exchange price at December 31, 2007 was
$73.25 per share. Upon an exchange of the notes, the Company will
settle any amounts up to the principal amount of the notes in cash and the
remaining exchange value, if any, will be settled, at the Company’s option, in
cash, common stock or a combination of both. The notes are not
redeemable at the option of the Company for five years, except to preserve the
status of the Company as a REIT. Holders of the notes may require the
Company to repurchase the notes upon the occurrence of certain designated
events. In addition, prior to November 1, 2026, the holders may
require the Company to repurchase the notes on November 1, 2011, 2016 and
2021. The notes will mature on November 1, 2026, unless previously
redeemed, repurchased or exchanged in accordance with their terms prior to that
date.
The
Company leases its corporate office space from an affiliate and the office space
for its regional offices from third parties. The corporate and
regional office space requires an annual base rent plus a pro-rata portion of
property improvements, real estate taxes, and common area
maintenance. These leases are set forth in the table below as
"Operating leases."
Purchase
obligations represent those costs that the Company is contractually obligated to
pay in the future. The significant components of this caption are
costs for capital improvements at the Company’s properties, as well as costs for
normal operating and maintenance expenses at the site level that are tied to
contracts such as utilities, landscaping and grounds maintenance and
advertising. The purchase obligations include amounts tied to
contracts, some of which expire in 2008. It is the Company's
intention to renew these normal operating contracts; however, there has been no
attempt to estimate the length or future costs of these contracts.
Tabular
Disclosure of Contractual Obligations:
|
|
Payments Due by Period (in
thousands)
|
|
Contractual Obligations
|
|
Total
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
Long-term
debt (1)
|
|
$ |
1,986,789 |
|
|
$ |
121,461 |
|
|
$ |
69,327 |
|
|
$ |
367,173 |
|
|
$ |
285,716 |
|
|
$ |
182,142 |
|
|
$ |
960,970 |
|
Exchangeable
senior notes (1)
|
|
|
200,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
200,000 |
|
|
|
- |
|
|
|
- |
|
Line
of credit (1)
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Operating
leases
|
|
|
5,420 |
|
|
|
2,254 |
|
|
|
2,242 |
|
|
|
472 |
|
|
|
260 |
|
|
|
192 |
|
|
|
- |
|
Purchase
obligations
|
|
|
8,367 |
|
|
|
7,282 |
|
|
|
769 |
|
|
|
285 |
|
|
|
30 |
|
|
|
1 |
|
|
|
- |
|
Total
(2)
|
|
$ |
2,203,076 |
|
|
$ |
133,497 |
|
|
$ |
72,338 |
|
|
$ |
367,930 |
|
|
$ |
486,006 |
|
|
$ |
182,335 |
|
|
$ |
960,970 |
|
(1)
|
Amounts
include principal payments only. The Company will pay interest
on outstanding indebtedness based on the rates and terms summarized in
Notes 4, 5 and 6 to the Consolidated Financial
Statements.
|
(2)
|
The
contractual obligations and other commitments in the table are set forth
as required by Item 303(a)(5) of Regulation S-K promulgated by the SEC in
January of 2003 and are not prepared in accordance with generally-accepted
accounting principles.
|
As
discussed in the section entitled "Variable Interest Entities," the Company,
through its general partnership interest in an affordable property limited
partnership, has guaranteed certain low income housing tax credits to limited
partners in this partnership totaling approximately $3 million. With
respect to the guarantee of the low income housing tax credits, the Company
believes the property's operations conform to the applicable requirements and
does not anticipate any payment on the guarantee. In addition,
the Company, acting as general partner in this partnership, is obligated to
advance funds to meet partnership operating deficits.
Capital
Improvements (dollars in thousands, except unit and per unit
data)
Effective
January 1, 2007, the Company updated its estimate of the amount of recurring,
non-revenue enhancing capital expenditures incurred on an annual basis for a
standard garden style apartment. The Company now estimates that the
annual amount is $760 per apartment unit compared to $525 in the prior five
years. This new amount better reflects current actual costs and the
effects of inflation since the last update.
The
Company’s policy is to capitalize costs related to the acquisition, development,
rehabilitation, construction and improvement of properties. Capital
improvements are costs that increase the value and extend the useful life of an
asset. Ordinary repair and maintenance costs that do not extend the
useful life of the asset are expensed as incurred. Costs incurred on
a lease turnover due to normal wear and tear by the resident are expensed on the
turn. Recurring capital improvements typically include: appliances,
carpeting and flooring, HVAC equipment, kitchen/bath cabinets, new roofs, site
improvements and various exterior building
improvements. Non-recurring, revenue generating capital improvements
include, among other items: community centers, new windows, and
kitchen/bath apartment upgrades. Revenue generating capital
improvements will directly result in rental earnings or expense
savings. The Company capitalizes interest and certain internal
personnel costs related to the communities under rehabilitation and
construction.
The table
below is a list of the items that management considers recurring, non-revenue
enhancing capital and maintenance expenditures for a standard garden style
apartment. Included are the per unit replacement cost and the useful
life that management estimates the Company incurs on an annual
basis.
|
|
|
|
|
|
|
|
|
|
|
Maintenance
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized
|
|
|
Expense
|
|
|
Total
|
|
|
|
Capitalized
|
|
|
|
|
|
Expenditure
|
|
|
Cost
per
|
|
|
Cost
per
|
|
|
|
Cost
per
|
|
|
Useful
|
|
|
Per
Unit
|
|
|
Unit
|
|
|
Unit
|
|
Category
|
|
Unit
|
|
|
Life(1)
|
|
|
Per
Year(2)
|
|
|
Per
Year(3)
|
|
|
Per
Year
|
|
Appliances
|
|
$ |
1,368 |
|
|
|
10 |
|
|
$ |
137 |
|
|
$ |
5 |
|
|
$ |
142 |
|
Blinds/shades
|
|
|
135 |
|
|
|
3 |
|
|
|
45 |
|
|
|
6 |
|
|
|
51 |
|
Carpets/cleaning
|
|
|
840 |
|
|
|
4 |
|
|
|
210 |
|
|
|
97 |
|
|
|
307 |
|
Computers,
equipment, misc.(4)
|
|
|
120 |
|
|
|
5 |
|
|
|
24 |
|
|
|
29 |
|
|
|
53 |
|
Contract
repairs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
102 |
|
|
|
102 |
|
Exterior
painting (5)
|
|
|
84 |
|
|
|
3 |
|
|
|
28 |
|
|
|
1 |
|
|
|
29 |
|
Flooring
|
|
|
250 |
|
|
|
7 |
|
|
|
36 |
|
|
|
- |
|
|
|
36 |
|
Furnace/air
(HVAC)
|
|
|
765 |
|
|
|
24 |
|
|
|
32 |
|
|
|
43 |
|
|
|
75 |
|
Hot
water heater
|
|
|
260 |
|
|
|
7 |
|
|
|
37 |
|
|
|
- |
|
|
|
37 |
|
Interior
painting
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
138 |
|
|
|
138 |
|
Kitchen/bath
cabinets
|
|
|
1,100 |
|
|
|
25 |
|
|
|
44 |
|
|
|
- |
|
|
|
44 |
|
Landscaping
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
106 |
|
|
|
106 |
|
New
roof
|
|
|
800 |
|
|
|
24 |
|
|
|
33 |
|
|
|
- |
|
|
|
33 |
|
Parking
lot
|
|
|
540 |
|
|
|
15 |
|
|
|
36 |
|
|
|
- |
|
|
|
36 |
|
Pool/exercise
facility
|
|
|
105 |
|
|
|
16 |
|
|
|
7 |
|
|
|
23 |
|
|
|
30 |
|
Windows
|
|
|
1,505 |
|
|
|
28 |
|
|
|
54 |
|
|
|
- |
|
|
|
54 |
|
Miscellaneous
(6)
|
|
|
555 |
|
|
|
15 |
|
|
|
37 |
|
|
|
40 |
|
|
|
77 |
|
Total
|
|
$ |
8,427 |
|
|
|
|
|
|
$ |
760 |
|
|
$ |
590 |
|
|
$ |
1,350 |
|
(1)
|
Estimated
weighted average actual physical useful life of the expenditure
capitalized.
|
(2)
|
This
amount is not necessarily incurred each and every year. Some
years will be higher, or lower depending on the timing of certain longer
life expenditures.
|
(3)
|
These
expenses are included in the Operating and maintenance line item of the
Consolidated Statement of Operations. Maintenance labor costs
are not included in the $590 per unit estimate. All personnel
costs for site supervision, leasing agents, and maintenance staff are
combined and disclosed in the Company's Core Properties expense detail
schedule.
|
(4)
|
Includes
computers, office equipment/furniture, and maintenance
vehicles.
|
(5)
|
The
level of exterior painting may be lower than other similar titled
presentations as the Company's portfolio has a significant amount of brick
exteriors. In addition, the other exposed surfaces are most
often covered in aluminum or vinyl.
|
(6)
|
Includes
items such as balconies, siding, and
concrete/sidewalks.
|
In
reviewing the breakdown of costs above, one must consider the Company's unique
strategy in operating apartments which has been to improve every property every
year regardless of age. Another part of its strategy is to purchase
older properties and rehab and reposition them to enhance internal rates of
return. This strategy results in higher costs of capital expenditures
and maintenance costs which is more than justified by higher revenue growth,
higher net operating income growth and a higher rate of property
appreciation.
The
Company estimates that approximately $760 and $525 per unit was spent on
recurring capital expenditures in 2007 and 2006, respectively. The
table below summarizes the breakdown of capital improvements by major categories
between recurring and non-recurring, revenue generating capital improvements as
follows:
|
|
For
the year ended December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Recurring
|
|
|
(a)
|
|
|
Non-recurring
|
|
|
(a)
|
|
|
Total
Capital
|
|
|
(a)
|
|
|
Total
Capital
|
|
|
(a)
|
|
|
|
Cap
Ex
|
|
|
Per
Unit
|
|
|
Cap
Ex
|
|
|
Per
Unit
|
|
|
Improvements
|
|
|
Per
Unit
|
|
|
Improvements
|
|
|
Per
Unit
|
|
New
buildings
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,067 |
|
|
$ |
56 |
|
|
$ |
2,067 |
|
|
$ |
56 |
|
|
$ |
2,392 |
|
|
$ |
72 |
|
Major
bldg improvements
|
|
|
4,368 |
|
|
|
119 |
|
|
|
13,036 |
|
|
|
355 |
|
|
|
17,404 |
|
|
|
474 |
|
|
|
16,936 |
|
|
|
512 |
|
Roof
replacements
|
|
|
1,211 |
|
|
|
33 |
|
|
|
2,810 |
|
|
|
77 |
|
|
|
4,021 |
|
|
|
110 |
|
|
|
3,357 |
|
|
|
101 |
|
Site
improvements
|
|
|
1,578 |
|
|
|
43 |
|
|
|
8,514 |
|
|
|
232 |
|
|
|
10,092 |
|
|
|
275 |
|
|
|
8,114 |
|
|
|
245 |
|
Apartment
upgrades
|
|
|
4,350 |
|
|
|
119 |
|
|
|
16,485 |
|
|
|
449 |
|
|
|
20,835 |
|
|
|
568 |
|
|
|
15,476 |
|
|
|
467 |
|
Appliances
|
|
|
3,945 |
|
|
|
107 |
|
|
|
4 |
|
|
|
- |
|
|
|
3,949 |
|
|
|
107 |
|
|
|
3,524 |
|
|
|
106 |
|
Carpeting/flooring
|
|
|
9,029 |
|
|
|
246 |
|
|
|
2,598 |
|
|
|
71 |
|
|
|
11,627 |
|
|
|
317 |
|
|
|
9,197 |
|
|
|
278 |
|
HVAC/mechanicals
|
|
|
2,533 |
|
|
|
69 |
|
|
|
9,636 |
|
|
|
263 |
|
|
|
12,169 |
|
|
|
332 |
|
|
|
11,128 |
|
|
|
336 |
|
Miscellaneous
|
|
|
881 |
|
|
|
24 |
|
|
|
2,125 |
|
|
|
58 |
|
|
|
3,006 |
|
|
|
82 |
|
|
|
3,014 |
|
|
|
91 |
|
Totals
|
|
$ |
27,895 |
|
|
$ |
760 |
|
|
$ |
57,275 |
|
|
$ |
1,561 |
|
|
$ |
85,170 |
|
|
$ |
2,321 |
|
|
$ |
73,138 |
|
|
$ |
2,208 |
|
(a)
Calculated using the weighted average number of units owned, including 32,600
core units, 2006 acquisition units of 3,067, and 2007 acquisition units of 1,036
for the year ended December 31, 2007 and 32,600 core units and 2006 acquisition
units of 505 for the year ended December 31, 2006.
The
schedule below summarizes the breakdown of total capital improvements between
core and non-core as follows:
|
|
For
the year ended December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Recurring
|
|
|
(a)
|
|
|
Non-recurring
|
|
|
(a)
|
|
|
Total
Capital
|
|
|
(a)
|
|
|
Total
Capital
|
|
|
(a)
|
|
|
|
Cap Ex
|
|
|
Per Unit
|
|
|
Cap Ex
|
|
|
Per Unit
|
|
|
Improvements
|
|
|
Per Unit
|
|
|
Improvements
|
|
|
Per Unit
|
|
Core
Communities
|
|
$ |
24,776 |
|
|
$ |
760 |
|
|
$ |
46,858 |
|
|
$ |
1,437 |
|
|
$ |
71,634 |
|
|
$ |
2,197 |
|
|
$ |
72,576 |
|
|
$ |
2,226 |
|
2007
Acquisition Communities
|
|
|
787 |
|
|
|
760 |
|
|
|
2,563 |
|
|
|
2,474 |
|
|
|
3,350 |
|
|
|
3,234 |
|
|
|
- |
|
|
|
- |
|
2006
Acquisition Communities
|
|
|
2,332 |
|
|
|
760 |
|
|
|
7,854 |
|
|
|
2,561 |
|
|
|
10,186 |
|
|
|
3,321 |
|
|
|
562 |
|
|
|
1,113 |
|
Subtotal
|
|
|
27,895 |
|
|
|
760 |
|
|
|
57,275 |
|
|
|
1,561 |
|
|
|
85,170 |
|
|
|
2,321 |
|
|
|
73,138 |
|
|
|
2,208 |
|
2007
Disposed Communities
|
|
|
562 |
|
|
|
760 |
|
|
|
1,317 |
|
|
|
1,782 |
|
|
|
1,879 |
|
|
|
2,542 |
|
|
|
3,787 |
|
|
|
3,494 |
|
2006
Disposed Communities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,067 |
|
|
|
1,044 |
|
Corporate
office expenditures (1)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,281 |
|
|
|
- |
|
|
|
3,560 |
|
|
|
- |
|
Totals
|
|
$ |
28,457 |
|
|
$ |
760 |
|
|
$ |
58,592 |
|
|
$ |
1,565 |
|
|
$ |
90,330 |
|
|
$ |
2,325 |
|
|
$ |
87,552 |
|
|
$ |
2,051 |
|
(1)
|
No
distinction is made between recurring and non-recurring expenditures for
corporate office. Corporate office expenditures include
principally computer hardware, software and office furniture and
fixtures.
|
Environmental
Issues
Phase I
environmental site assessments have been completed on substantially all of the
Owned Properties. As of December 31, 2007, there were no recorded
amounts resulting from environmental liabilities as there were no known
contingencies with respect thereto. Furthermore, no condition is
known to exist that would give rise to a material liability for site restoration
or other costs that may be incurred with respect to the sale or disposal of a
property.
During
the past few years, there has been media attention given to the subject of mold
in residential communities. The Company has responded to this
attention by providing to its community management the Company's Operation and
Maintenance Plan for the Control of Moisture (“O&M Plan”). The
O&M Plan, designed to analyze and manage all exposures to mold, has been
implemented at all of the Company's communities. There have been only
limited cases of mold identified to management due to the application and
practice of the O&M Plan. No condition is known to exist that
would give rise to a material liability for site restoration or other costs that
may be incurred with respect to mold.
Recent
Accounting Pronouncements
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"). SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 applies
under other accounting pronouncements that require or permit fair value
measurements; the FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new fair value
measurements. This statement is effective in fiscal years beginning
after November 15, 2007, except for non-financial assets and non-financial
liabilities that are not recognized or disclosed at fair value on a recurring
basis, for which the effective date is fiscal years beginning after November 15,
2008. The Company is currently evaluating the impact and believes
that the adoption of SFAS 157 will not have a material effect on its financial
position and results of operations.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities Including an Amendment of FASB Statement No.
115 (“SFAS 159”). SFAS 159 is effective for financial
statements issued for fiscal years beginning after November 15,
2007. Under SFAS 159, entities are now permitted to measure many
financial instruments and certain other assets and liabilities at fair value on
an instrument-by-instrument basis under a fair value option granted in SFAS
159. Excluded from the scope of SFAS 159 are real estate assets and
interests in variable interest entities. The Company is currently
evaluating the impact and believes that the adoption of SFAS 159 will not have a
material effect on its financial position and results of
operations.
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS
141R”), which establishes principles and requirements for how the acquirer shall
recognize and measure in its financial statements the identifiable assets
acquired, liabilities assumed, any non-controlling interest in the acquiree and
goodwill acquired in a business combination. This statement is
effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company is currently assessing the
potential impact that the adoption of SFAS 141R will have on its financial
position and results of operations.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51 (“SFAS
160”), which establishes and expands accounting and reporting standards for
minority interests, which will be re-characterized as non-controlling interests,
in a subsidiary and the deconsolidation of a subsidiary. SFAS 160 is
effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. This statement is effective for fiscal years
beginning on or after December 15, 2008. The Company is currently
assessing the potential impact that the adoption of SFAS 160 will have on its
financial position and results of operations.
Economic
Conditions
Substantially
all of the leases at the communities are for a term of one year or less, which
enables the Company to seek increased rents upon renewal of existing leases or
commencement of new leases. These short-term leases minimize the
potential adverse effect of inflation on rental income, although residents may
leave without penalty at the end of their lease terms and may do so if rents are
increased significantly.
Historically,
real estate has been subject to a wide range of cyclical economic conditions,
which affect various real estate sectors and geographic regions with differing
intensities and at different times. Starting in 2001 and continuing
into 2004 many regions of the United States had experienced varying degrees of
economic recession and certain recessionary trends, such as a temporary
reduction in occupancy and reduced pricing power limiting the ability to
aggressively raise rents. Starting in the second half on 2004 and
continuing into 2007, we have seen a reversal of these recessionary
trends. However, in the fourth quarter of 2007 and into 2008, the
sub-prime issue has put significant pressure on the mortgage lending
industry. The Company has not had any unfavorable outcomes from this
issue and has continued to receive favorable financing at market rates of
interest. In light of this, we will continue to review our business
strategy; however, we believe that given our property type and the geographic
regions in which we are located, we do not anticipate any changes in our
strategy or material effects on financial performance.
Contingencies
The
Company is not a party to any legal proceedings which are expected to have a
material adverse effect on the Company's liquidity, financial position or
results of operations. The Company is subject to a variety of legal
actions for personal injury or property damage arising in the ordinary course of
its business, most of which are covered by liability and property
insurance. Various claims of employment and resident discrimination
are also periodically brought. While the resolution of these matters
cannot be predicted with certainty, management believes that the final outcome
of such legal proceedings and claims will not have a material adverse effect on
the Company's liquidity, financial position or results of
operations.
Forward Looking
Statements
This Form
10-K contains "forward-looking statements" within the meaning of Section 27A of
the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, both as amended. Some examples of forward-looking
statements include statements related to acquisitions (including any related pro
forma financial information), future capital expenditures, potential development
and redevelopment opportunities, projected costs and rental rates for
development and redevelopment projects, financing sources and availability, and
the effects of environmental and other regulations. Although the
Company believes that the expectations reflected in those forward-looking
statements are based upon reasonable assumptions, it can give no assurance that
its expectations will be achieved. Factors that may cause actual
results to differ include general economic and local real estate conditions, the
weather and other conditions that might affect operating expenses, the timely
completion of repositioning activities and development within anticipated
budgets, the actual pace of future development, acquisitions and sales, and
continued access to capital to fund growth. For this purpose, any
statements contained in this Form 10-K that are not statements of historical
fact should be considered to be forward-looking statements. Some of
the words used to identify forward-looking statements include "believes",
"anticipates", "plans", "expects", "seeks", "estimates", and similar
expressions. Readers should exercise caution in interpreting and
relying on forward-looking statements since they involve known and unknown
risks, uncertainties and other factors which are, in some cases, beyond the
Company's control and could materially affect the Company's actual results,
performance or achievements.
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk
The
Company’s primary market risk exposure is interest rate risk. At
December 31, 2007 and December 31, 2006, approximately 99% of the Company’s
debt bore interest at fixed rates for both periods. At December 31,
2007 and December 31, 2006, approximately 89% of the Company’s debt was secured
and bore interest at fixed rates with a weighted average maturity of
approximately 6 years, for both periods, and a weighted average interest rate of
approximately 5.76% and 5.77%, respectively, including the $28 million of
secured debt which was swapped to a fixed rate at December 31,
2006. The remainder of the Company’s secured debt bore interest at
variable rates with a weighted average maturity of approximately 20 and 21 years
and a weighted average interest rate of 4.63% and 4.95%, for 2007 and 2006,
respectively. The Company does not intend to utilize a significant
amount of permanent variable rate debt to acquire properties in the
future. On occasion, the Company may use its line of credit in
connection with a property acquisition or stock repurchase with the intention to
refinance at a later date. The Company believes, however, that in no
event would increases in interest expense as a result of inflation significantly
impact the Company's distributable cash flow.
At
December 31, 2007 and December 31, 2006, the fair value of the Company’s fixed
and variable rate secured debt, including the $28 million of secured debt which
was swapped to a fixed rate at December 31, 2006, amounted to a liability of
$2.02 billion and $1.93 billion, respectively, compared to its carrying amount
of $1.99 billion and $1.92 billion, respectively. The Company
estimates that a 100 basis point increase in market interest rates at December
31, 2007 would have changed the fair value of the Company’s fixed and variable
rate secured debt to a liability of $1.93 billion.
The
Company intends to continuously monitor and actively manage interest costs on
its variable rate debt portfolio and may enter into swap positions based upon
market fluctuations. In addition, the Company believes that it has
the ability to obtain funds through additional debt and/or equity offerings
and/or the issuance of UPREIT Units. Accordingly, the cost of
obtaining such interest rate protection agreements in relation to the Company's
access to capital markets will continue to be evaluated. The Company
has not, and does not plan to, enter into any derivative
financial instruments for
trading or speculative purposes. As of December 31, 2007, the Company
had no other material exposure to market risk.
Additional
disclosure about market risk is incorporated herein by reference to the
discussion under the heading "Results of Operations" in Item
7: Managements Discussion and Analysis of Financial Condition and
Results of Operations.
Item 8. Financial
Statements and Supplementary Data
The
financial statements and supplementary data are listed under Item 15(a) and
filed as part of this report on the pages indicated.
Item 9. Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Disclosure
Controls and Procedures.
The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the reports filed or submitted by
the Company under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and that such information is accumulated
and communicated to the officers who certify the Company’s financial reports and
to the other members of senior management and the Board of
Directors.
The
principal executive officer and principal financial officer evaluated, as of
December 31, 2007, the effectiveness of the disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) and have determined that such
disclosure controls and procedures are effective.
Management’s Annual Report
on Internal Control Over Financial Reporting
The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rule 13a-15(f). Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. The Company’s internal
control over financial reporting is a process designed under the supervision of
the Company’s principal executive officer and principal financial officer to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the Company’s financial statements for external reporting
purposes in accordance with the United States of America generally accepted
accounting principles.
Under the
supervision and with the participation of management, including the Company’s
principal executive officer and principal financial officer, the Company
conducted an evaluation of the effectiveness of its internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on its evaluation under that framework,
management concluded that the Company’s internal control over financial
reporting was effective as of December 31, 2007. In addition,
management has not identified any material weaknesses in the Company's internal
controls.
The
effectiveness of the Company's internal control over financial reporting as of
December 31, 2007 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which appears
herein.
Changes in Internal Control
Over Financial Reporting
There
were no changes in the internal controls over financial reporting that occurred
during the fourth quarter of the year ended December 31, 2007 that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
None.
PART
III
Item
10. Directors and Executive
Officers of the Registrant
Directors
The Board
of Directors (the "Board") currently consists of eleven members. The
terms for all of the directors of Home Properties expire at the 2008
Shareholders' Meeting. All of the directors have agreed to stand for
re-election at the 2008 Stockholders Meeting, except for Thomas S. Summer, who
has notified the Company that he will not stand for re-election because of
responsibilities associated with a new employment position.
The
information sets forth, as of February 22, 2008, for each director of the
Company such director's name, experience during the last five years, other
directorships held, age and the year such director was first elected as director
of the Company.
|
|
Year
First
|
Name of Director
|
Age
|
Elected Director
|
Josh
E. Fidler
|
52
|
2004
|
Alan
L. Gosule
|
67
|
1996
|
Leonard
F. Helbig, III
|
62
|
1994
|
Roger
W. Kober
|
74
|
1994
|
Nelson
B. Leenhouts
|
72
|
1993
|
Norman
Leenhouts
|
72
|
1993
|
Edward
J. Pettinella
|
56
|
2001
|
Clifford
W. Smith, Jr.
|
61
|
1994
|
Paul
L. Smith
|
72
|
1994
|
Thomas
S. Summer
|
54
|
2004
|
Amy
L. Tait
|
49
|
1993
|
Josh E. Fidler has been a
director of the Company since August, 2004. Mr. Fidler is a Founding
Partner of Boulder Ventures, Ltd., a manager of venture capital funds, which has
been in operation since 1995. Since 1985, he has also been a
principal in a diversified real estate development business known as The Macks
Group. In 1999, the Company acquired 3,297 apartment units from
affiliates of The Macks Group. Mr. Fidler was also a principal of the
entity which owned a 240 unit apartment community which the Company purchased in
2004. He is a graduate of Brown University and received a law degree
from New York University. Mr. Fidler is a member of the Maryland
Region Advisory Board of SunTrust Bank, the Board of Johns Hopkins Medicine and
President of the Board of Trustees of The Park School.
Alan L. Gosule, has been a
director of the Company since 1996. Mr. Gosule has been a partner in
the New York Office of the law firm of Clifford Chance US LLP (successor to
Rogers & Wells) since August 1991 and prior to that time was a partner in
the law firm of Gaston & Snow. Mr. Gosule is a graduate of Boston
University and its Law School and received an LLM in Taxation from Georgetown
University. Mr. Gosule also serves on the Boards of Directors of MFA
Mortgage Investments, Inc. and F.L. Putnam Investment Management
Company. He also serves on the Board of Trustees of Ursuline
Academy.
Leonard F. Helbig, III has
been a director of the Company since 1994. Since September 2002 he
has served as a Director of Integra Realty Advisors in
Philadelphia. Between 1980 and 2002 he was employed with Cushman
& Wakefield, Inc. From 1990 until 2002, Mr. Helbig served as
President, Financial Services for Cushman & Wakefield, Inc. Prior
to that and since 1984, Mr. Helbig was the Executive Managing Director of the
Asset Services and Financial Services Groups. He was a member of that
firm's Board of Directors and Executive Committee. Mr. Helbig is a
member of the Urban Land Institute, the Pension Real Estate Association and the
International Council of Shopping Centers. Mr. Helbig is a
graduate of LaSalle University and holds the MAI designation of the American
Institute of Real Estate Appraisers.
Roger W. Kober has been a
director of the Company since 1994. He was employed by Rochester Gas
and Electric Corporation from 1965 until his retirement on January 1,
1998. From March 1996 until January 1, 1998, Mr. Kober served as
Chairman and Chief Executive Officer of Rochester Gas and Electric
Corporation. He is a Trustee
Emeritas
of Rochester Institute of Technology. Mr. Kober is a graduate of
Clarkson College and holds a Masters Degree in Engineering from Rochester
Institute of Technology.
Nelson B. Leenhouts has served
as Board Co-Chair since his retirement as Co-Chief Executive Officer effective
January 1, 2004. He had served as Co-Chief Executive Officer,
President and a director of the Company since its inception in
1993. Since its formation, he has also served as a director of HPRS,
for which he had also served in various officer capacities prior to his
retirement. Mr. Leenhouts also served as a Senior Advisor to the
Company pursuant to an Employment Agreement with a term that expired on December
31, 2006. In addition, Nelson Leenhouts was employed by the Company
to fulfill additional responsibilities with respect to the Company’s development
activities pursuant to a Development Agreement, the term of which also expired
on December 31, 2006. Mr. Leenhouts subsequently entered into an
Employment Agreement with a term that expired on December 31,
2007. He continues as an employee of the Company working as a liaison
to the development team, but he no longer has an employment
agreement. Nelson Leenhouts was the founder, and a co-owner, together
with Norman Leenhouts, of Home Leasing, and has continued to serve as
President of Home Leasing since 1967. He is a member of the Board of
Directors of the Genesee Valley Trust Company. Nelson Leenhouts is a
graduate of the University of Rochester. He is the twin brother of
Norman Leenhouts, the uncle of Amy L. Tait and the step-father of executive
officer, Johanna A. Falk.
Norman P. Leenhouts has served
as Board Co-Chair since his retirement as Co-Chief Executive Officer effective
January 1, 2004. He had served as Board Chair, Co-Chief Executive
Officer and a director of the Company since its inception in
1993. Since its formation, he has also served as a director of
HPRS. Mr. Leenhouts also served as a Senior Advisor to the
Company pursuant to an Employment Agreement with a term that expired on December
31, 2006. Prior to January 1, 2006, Norman Leenhouts was a co-owner,
together with Nelson Leenhouts, of Home Leasing, where he had served as Board
Chair since 1971. He is currently the Chairman of Broadstone
Ventures, LLC and Broadstone Real Estate, LLC, formed to contain the property
management business of Home Leasing and of Broadstone Net Lease, Inc., which is
a private REIT that invests in net lease properties, as well as Broadstone Asset
Management, LLC. He is a member of the Board of Trustees of the
University of Rochester and The Charles E. Finney School, where he also serves
as Board Chair. He is a graduate of the University of Rochester and
is a certified public accountant. He is the twin brother of Nelson
Leenhouts and the father of Amy L. Tait.
Edward J. Pettinella has
served as President and Chief Executive Officer of the Company since January 1,
2004. He is also a director. He joined the Company in 2001
as an Executive Vice President and director. He is also the President
and Chief Executive Officer of HPRS. From 1997 until February 2001,
Mr. Pettinella served as President, Charter One Bank of New York and
Executive Vice President of Charter One Financial, Inc. From 1980
through 1997, Mr. Pettinella served in several managerial capacities for
Rochester Community Savings Bank, Rochester, NY, including the positions of
Chief Operating Officer and Chief Financial
Officer. Mr. Pettinella serves on the Board of Directors of
Rochester Business Alliance, United Way of Greater Rochester, The Lifetime
Healthcare Companies, National Multi Housing Counsel, Syracuse University School
of Business and the Geneseo Foundation Board. He is also a member of
Urban Land Institute. Mr. Pettinella is a graduate of the State
University at Geneseo and holds an MBA Degree in finance from Syracuse
University.
Clifford
W. Smith, Jr. has been a director of the Company since
1994. Mr. Smith is the Epstein Professor of Finance of the William E.
Simon Graduate School of Business Administration of the University of Rochester,
where he has been on the faculty since 1974. He has written numerous
books and articles on a variety of financial, capital markets and risk
management topics and has held editorial positions for a variety of
journals. Mr. Smith is a graduate of Emory University and has a PhD
from the University of North Carolina at Chapel Hill.
Paul
L. Smith has been a director of the Company since 1994. Mr.
Smith was a director, Senior Vice President and the Chief Financial Officer of
the Eastman Kodak Company from 1983 until he retired in 1993. He was
a member of the Financial Accounting Standards Advisory Council. He
is currently a director of Constellation Brands, Inc. He is also a
member of the Board of Trustees of the George Eastman House and Ohio Wesleyan
University. Mr. Smith is a graduate of Ohio Wesleyan University and
holds an MBA Degree in finance from
Northwestern University.
Thomas
S. Summer has been a director of the Company since August,
2004. Mr. Summer was the Executive Vice President and Chief Financial
Officer of Constellation Brands, Inc. until May 15, 2007. Prior to
his employment by Constellation Brands, he held various positions in financial
management with Cardinal Health, Inc., PepsiCo, Inc.,
and
Inland Steel Industries. As of January 22, 2008, Mr. Summer is the
Chief Financial Officer of Advance Publications, Inc. and the President of
Advance Financial Group, LLC. As a result of these new positions, Mr.
Summer has notified the Company that he will not stand for re-election at the
2008 Stockholders Meeting. He is currently a member of the Board of
Greatbatch, Inc., but will not stand for re-election at their next stockholders
meeting. Mr. Summer is a graduate of Harvard University and holds an
MBA degree in finance and accounting from the University of
Chicago.
Amy L. Tait has served as a
director of the Company since its inception in 1993. Effective
February 15, 2001, Mrs. Tait resigned her full-time position as Executive
Vice President of the Company and as a director of HP Management. She
continued as a consultant to the Company pursuant to a consulting agreement that
terminated on February 15, 2002. She founded Tait Realty Advisors,
LLC in 2001, and is currently the Chief Executive Officer and a director of
Broadstone Ventures, LLC, Broadstone Real Estate, LLC, Broadstone Net Lease,
Inc. and Broadstone Asset Management, LLC where she also serves as
Secretary. Mrs. Tait joined Home Leasing in 1983 and held several
positions with the Company, including Senior and Executive Vice President and
Chief Operating Officer. She currently serves on the M & T Bank
Regional Advisory Board and the boards of the United Way of Rochester, Center
for Governmental Research, Allendale Columbia School, Monroe County Center for
Civic Entrepreneurship and the Simon School Executive Advisory
Committee. Mrs. Tait is a graduate of Princeton University and holds
an MBA from the William E. Simon Graduate School of Business Administration of
the University of Rochester. She is the daughter of Norman Leenhouts
and the niece of Nelson B. Leenhouts.
See Item
4A in Part I hereof for information regarding executive officers of the
Company.
Section 16(a) Beneficial
Ownership Reporting Compliance.
Section
16(a) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange. Officers, directors and
greater than 10% shareholders are required to furnish the Company with copies of
all Section 16(a) forms they file.
To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required during the fiscal year ended December 31, 2007, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were satisfied on a timely basis, except as
follows. The purchase of 2,000 shares of Common Stock by Leonard F.
Helbig, III was reported late as a result of a delay related to a new filing
software system used by the Company. The accrual of phantom stock
units under the Company’s Deferred Bonus Plan (to be converted into common
shares at the end of the deferral period) into the deferred bonus accounts of
the following executive officers was reported late as was the deposit of
additional shares into those accounts pursuant to the dividend reinvestment
feature of the Deferred Bonus Plan: Johanna Falk: 479 phantom units
on initial deferral/14 phantom units on dividend reinvestment; Robert J. Luken:
392 phantom units on initial deferral/5 phantom units on dividend reinvestment;
Ann M. McCormick: 833 phantom units on initial deferral/44 phantom units on
dividend reinvestment; and Scott Doyle: 1,198 phantom units on initial
deferral/22 phantom units on dividend reinvestment. All of the above
transactions were subsequently reported on a Form 4.
Audit Committee, Audit
Committee Independence and Financial Expert
The
information required by this item is incorporated herein by reference to the
Company’s proxy statement to be issued in connection with the Annual Meeting of
Stockholders of the Company to be held on May 1, 2008 under “Board Matters/Board
Committees/Audit Committee.” The proxy statement will be filed within
120 days after the end of the Company’s fiscal year.
Stockholder Nominations to
Board
The
information required by this item is incorporated herein by reference to the
Company’s Proxy Statement to be issued in connection with the Annual Meeting of
Stockholders of the Company to be held on May 1, 2008 under “Board
Matters/Stockholder Nominees.” The proxy statement will be filed
within 120 days after the end of the Company’s fiscal year.
Code of
Ethics
The
Company has adopted a Code of Business Conduct and Ethics and a Code of Ethics
for Senior Financial Officers, both which apply to the Company’s Chief Executive
Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer and
Controller. Both codes are available on the Company’s Web site at
www.homeproperties.com under the heading “Investors/Corporate
Governance/Highlights.” In addition, the Company will provide a copy
of the codes to anyone without charge, upon request addressed to the Corporate
Secretary at Home Properties, Inc., 850 Clinton Square, Rochester, New York
14604.
The
Company intends to disclose any amendment to its Code of Business Conduct and
Ethics and its Code of Ethics for Senior Financial Officers on its Web
site. In addition, in the event that the Company waives compliance by
any of its directors and executive officers with the Code of Business Conduct
and Ethics or compliance by any of the individuals subject to the Code of Ethics
for Senior Financial Officers with that Code of Ethics, the Company will post on
its Web site within four business days the nature of the waiver in satisfaction
of its disclosure requirement under Item 5.05 of Form 8-K.
Corporate Guidelines and
Committee Charters
The Board
of Directors has adopted corporate Governance Guidelines and revised charters in
compliance with applicable law and NYSE listing standards for the Company's
Audit, Compensation, Corporate Governance/Nominating and Real Estate Investment
Committees. The Guidelines and Charters are available on the
Company's Web site, www.homeproperties.com, and by request addressed to the
Corporate Secretary at Home Properties, Inc., 850 Clinton Square,
Rochester, New York 14604.
The
information required by this Item is incorporated herein by reference to the
Company's proxy statement to be issued in connection with the Annual Meeting of
the Stockholders of the Company to be held on May 1, 2008 under "Executive
Compensation" and “Board Matters/Compensation Committee Interlocks and Insider
Participation.” The proxy statement will be filed within 120 days
after the end of the Company's fiscal year.
Item
12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters
The
information required by this Item, including Equity Compensation Plan
Information, is incorporated herein by reference to the Company's proxy
statement to be issued in connection with the Annual Meeting of Stockholders of
the Company to be held on May 1, 2008 under "Security Ownership of Certain
Beneficial Owners and Management" and under "Equity Compensation Plan
Information." The proxy statement will be filed within 120 days after
the end of the Company's fiscal year.
Item
13. Certain Relationships and
Related Transactions, and Director Independence
The
information required by this Item is incorporated herein by reference to the
Company's proxy statement to be issued in connection with the Annual Meeting of
Stockholders of the Company to be held on May 1, 2008 under "Transactions with
Related Persons, Promoters and Certain Control Persons” and “Board Matters/Board
Independence." The proxy statement will be filed within 120 days
after the end of the Company's fiscal year.
Item
14. Principal Accounting Fees
and Services
The
information required by this Item is incorporated herein by reference to the
Company's proxy statement to be issued in connection with the Annual Meeting of
Stockholders of the Company to be held on May 1, 2008 under “Report of the Audit
Committee” and "Principal Accounting Fees and Services." The proxy
statement will be filed within 120 days after the end of the Company's fiscal
year.
Item
15. Exhibits, Financial
Statement Schedules
(a) 1 and
2. Financial Statements and Schedules
|
The
financial statements and schedules listed below are filed as part of this
annual report on the pages
indicated.
|
Consolidated
Financial Statements
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
68
|
Consolidated
Balance Sheets
|
|
as of December 31, 2007 and
2006
|
69
|
Consolidated
Statements of Operations
|
|
for the Years Ended December 31, 2007, 2006
and 2005
|
70
|
Consolidated
Statements of Stockholders' Equity and Comprehensive
Income
|
|
for the Years Ended December 31, 2007, 2006
and 2005
|
71
|
Consolidated
Statements of Cash Flows
|
|
for the Years Ended December 31, 2007, 2006
and 2005
|
72
|
Notes
to Consolidated Financial Statements
|
73
|
Schedule
II:
|
|
Valuation and Qualifying
Accounts
|
98
|
Schedule
III:
|
|
Real Estate and Accumulated
Depreciation
|
99
|
3. Exhibits
Exhibit
Number
|
Exhibit
|
1.0
|
Underwriting
Agreement, dated May 9, 2006, between Home Properties, Inc., UBS
Securities LLC and the selling shareholders named
therein.
|
2.1
|
Agreement
among Home Properties of New York, Inc. and Philip J. Solondz, Daniel
Solondz and Julia Weinstein Relating to Royal Gardens I, together with
Amendment No. 1
|
2.2
|
Agreement
among Home Properties of New York, Inc and Philip Solondz and Daniel
Solondz relating to Royal Gardens II, together with Amendment No.
1
|
2.24
|
Contribution
Agreement dated March 2, 1998 among Home Properties of New York, L.P.,
Braddock Lee Limited Partnership and Tower Construction Group,
LLC
|
2.25
|
Contribution
Agreement dated March 2, 1998 among Home Properties of New York, L.P.,
Park Shirlington Limited Partnership and Tower Construction Group,
LLC
|
2.27
|
Form
of Contribution Agreement among Home Properties of New York, L.P. and
Strawberry Hill Apartment Company LLLP, Country Village Limited
Partnership, Morningside Six, LLLP, Morningside North Limited Partnership
and Morningside Heights Apartment Company Limited Partnership with
schedule setting forth material details in which documents differ from
form
|
Exhibit
Number
|
Exhibit
|
2.29
|
Form
of Contribution Agreement dated June 7, 1999, relating to the CRC
Portfolio with schedule setting forth material details in which documents
differ from form
|
2.30
|
Form
of Contribution Agreement relating to the Mid-Atlantic Portfolio with
schedule setting forth material details in which documents differ from
form
|
2.31
|
Contribution
Agreement among Home Properties of New York, L.P., Leonard Klorfine,
Ridley Brook Associates and the Greenacres Associates
|
2.33
|
Contribution
Agreement among Home Properties of New York, L.P., Gateside-Bryn Mawr
Company, L.P., Willgold Company, Gateside-Trexler Company, Gateside-Five
Points Company, Stafford Arms, Gateside-Queensgate Company, Gateside
Malvern Company, King Road Associates and Cottonwood
Associates
|
2.34
|
Contribution
Agreement between Old Friends Limited Partnership and Home Properties of
New York, L.P. and Home Properties of New York, Inc., along with
Amendments Number 1 and 2 thereto
|
2.35
|
Contribution
Agreement between Deerfield Woods Venture Limited Partnership and Home
Properties of New York, L.P.
|
2.36
|
Contribution
Agreement between Macomb Apartments Limited Partnership and Home
Properties of New York, L.P.
|
2.37
|
Contribution
Agreement between Home Properties of New York, L.P. and Elmwood Venture
Limited Partnership
|
2.38
|
Sale
Purchase and Escrow Agreement between Bank of America as Trustee and Home
Properties of New York, L.P.
|
2.39
|
Contribution
Agreement between Home Properties of New York, L.P., Home Properties of
New York, Inc. and S&S Realty, a New York General Partnership (South
Bay)
|
2.40
|
Contribution
Agreement between Hampton Glen Apartments Limited Partnership and Home
Properties of New York, L.P.
|
2.41
|
Contribution
Agreement between Home Properties of New York, L.P. and Axtell Road
Limited Partnership
|
2.42
|
Contribution
Agreement between Elk Grove Terrace II and III, L.P., Elk Grove Terrace,
L.P. and Home Properties of New York, L.P.
|
2.43
|
Agreement
for Purchase and Sale of Interests Southeast Michigan Portfolio, dated
April 26, 2006, together with Second Amendment thereto (First Amendment
superseded)
|
3.1
|
Articles
of Amendment and Restatement of Articles of Incorporation of Home
Properties of New York, Inc.
|
3.2
|
Articles
of Amendment of the Articles of Incorporation of Home Properties of New
York, Inc.
|
3.3
|
Articles
of Amendment of the Articles of Incorporation of Home Properties of New
York, Inc.
|
3.9
|
Amended
and Restated By-Laws of Home Properties of New York, Inc. (Revised
12/30/96)
|
3.10
|
Series
F Cumulative Redeemable Preferred Stock Articles Supplementary to the
Amended and Restated Articles of Incorporation of Home Properties of New
York, Inc.
|
3.11
|
Articles
of Amendment to the Articles of Incorporation of Home Properties of New
York, Inc.
|
3.12
|
Amendment
Number One to Home Properties of New York, Inc. Amended and Restated
Bylaws
|
3.13
|
Second
Amended and Restated By-Laws of Home Properties, Inc.
|
4.1
|
Form
of certificate representing Shares of Common Stock
|
4.2
|
Agreement
of Home Properties of New York, Inc. to file instruments defining the
rights of holders of long-term debt of it or its subsidiaries with the
Commission upon request
|
4.8
|
Amended
and Restated Stock Benefit Plan of Home Properties of New York,
Inc.*
|
Exhibit
Number
|
Exhibit
|
4.14
|
Directors'
Stock Grant Plan*
|
4.16
|
Home
Properties of New York, Inc., Home Properties of New York, L.P. Executive
Retention Plan*
|
4.17
|
Home
Properties of New York, Inc. Deferred Bonus Plan*
|
4.23
|
Home
Properties of New York, Inc. Amendment Number One to the Amended and
Restated Stock Benefit Plan*
|
4.26
|
Home
Properties of New York, Inc. Amendment Number Two to the Amended and
Restated Stock Benefit Plan*
|
4.27
|
Amendment
No. One to Home Properties of New York, Inc. Deferred Bonus
Plan*
|
4.29
|
Amendment
No. Two to Deferred Bonus Plan*
|
4.31
|
Amended
and Restated 2003 Stock Benefit Plan*
|
4.32
|
Second
Amended and Restated Director Deferred Compensation
Plan*
|
4.33
|
Seventh
Amended and Restated Dividend Reinvestment and Direct Stock Purchase
Plan
|
4.34
|
Indenture,
dated October 24, 2006 between Home Properties, Inc., Home Properties,
L.P. and Wells Fargo Bank, N.A., as trustee including the form of 4.125%
Exchangeable Senior Notes due 2026 of Home Properties, L.P. and the
Guarantee of Home Properties, Inc. with respect thereto
|
4.35
|
Registration
Rights Agreement, dated October 24, 2006, between Home Properties, Inc.,
Home Properties, L.P. and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Bear Stearns & Co.,
Inc.
|
4.36
|
Deferred
Bonus Plan (Amended and Restated as of January 1,
2008)*
|
4.37
|
Director
Deferred Compensation Plan (Amended and Restated as of January 1,
2008)*
|
10.1
|
Second
Amended and Restated Agreement Limited Partnership of Home Properties of
New York, L.P.
|
10.2
|
Amendments
No. One through Eight to the Second Amended and Restated Agreement of
Limited Partnership of Home Properties of New York,
L.P.
|
10.3
|
Articles
of Incorporation of Home Properties Management, Inc.
|
10.4
|
By-Laws
of Home Properties Management, Inc.
|
10.5
|
Articles
of Incorporation of Conifer Realty Corporation
|
10.6
|
Articles
of Amendment to the Articles of Incorporation of Conifer Realty
Corporation Changing the name to Home Properties Resident Services,
Inc.
|
10.7
|
By-Laws
of Conifer Realty Corporation (now, Home Properties Resident Services,
Inc.)
|
10.8
|
Home
Properties Trust Declaration of Trust, dated September 19,
1997
|
10.13
|
Indemnification
Agreement between Home Properties of New York, Inc. and certain officers
and directors*
|
10.15
|
Indemnification
Agreement between Home Properties of New York, Inc. and Alan L.
Gosule*
|
10.26
|
Amendment
No. Nine to the Second Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
|
10.27
|
Master
Credit Facility Agreement by and among Home Properties of New York, Inc.,
Home Properties of New York, L.P., Home Properties WMF I LLC and Home
Properties of New York, L.P. and P-K Partnership doing business as
Patricia Court and Karen Court and WMF Washington Mortgage Corp., dated as
of August 28, 1998
|
Exhibit
Number
|
Exhibit
|
10.28
|
First
Amendment to Master Credit Facility Agreement, dated as of December 11,
1998 among Home Properties of New York, Inc., Home Properties of New York,
L.P., Home Properties WMF I LLC and Home Properties of New York, L.P. and
P-K Partnership doing business as Patricia Court and Karen Court and WMF
Washington Mortgage Corp. and Fannie Mae
|
10.29
|
Second
Amendment to Master Credit Facility Agreement, dated as of August 30, 1999
among Home Properties of New York, Inc., Home Properties of New York,
L.P., Home Properties WMF I LLC and Home Properties of New York, L.P. and
P-K Partnership doing business as Patricia Court and Karen Court and WMF
Washington Mortgage Corp. and Fannie Mae
|
10.30
|
Amendments
Nos. Ten through Seventeen to the Second Amended and Restated Limited
Partnership Agreement
|
10.31
|
Amendments
Nos. Eighteen through Twenty- Five to the Second Amended and Restated
Limited Partnership Agreement
|
10.32
|
Credit
Agreement, dated 8/23/99 between Home Properties of New York, L.P.,
certain lenders, and Manufacturers and Traders Trust Company as
Administrative Agent
|
10.33
|
Amendment
No. Twenty-Seven to the Second Amended and Restated Limited Partnership
Agreement
|
10.34
|
Amendments
Nos. Twenty-Six and Twenty-Eight through Thirty to the Second Amended and
Restated Limited Partnership Agreement
|
10.37
|
2000
Stock Benefit Plan*
|
10.41
|
Home
Properties of New York, L.P. Amendment Number One to Executive Retention
Plan*
|
10.42
|
Amendments
No. Thirty-One and Thirty-Two to the Second Amended and Restated Limited
Partnership Agreement
|
10.49
|
Amendment
No. Thirty Three to the Second Amended and Restated Limited Partnership
Agreement
|
10.50
|
Amendment
No. Thirty Five to the Second Amended and Restated Limited Partnership
Agreement
|
10.51
|
Amendment
No. Forty Two to the Second Amended and Restated Limited Partnership
Agreement
|
10.52
|
Amendments
Nos. Thirty Four, Thirty Six through Forty One, Forty Three and Forty Four
to the Second Amended and Restated Limited Partnership
Agreement
|
10.57
|
Amendment
Nos. Forty-Five through Fifty-One to the Second Amendment and Restated
Limited Partnership Agreement
|
10.58
|
Home
Properties of New York, Inc. Amendment No. One to 2000 Stock Benefit
Plan*
|
10.59
|
Home
Properties of New York, Inc. Amendment No. Two to 2000 Stock Benefit
Plan*
|
10.60
|
Amendment
Nos. Fifty-Two to Fifty-Five to the Second Amended and Restated Limited
Partnership Agreement
|
10.61
|
Amendment
Nos. Fifty-Six to Fifty-Eight to the Second Amended and Restated Limited
Partnership Agreement
|
10.62
|
Amendment
No. Two to Credit Agreement
|
10.63
|
Purchase
and Sale Agreement, dated as of January 1, 2004 among Home Properties of
New York, L.P., Home Properties Management, Inc. and Home Leasing, LLC,
dated January 1, 2004
|
10.64
|
Amendment
Nos. Fifty-Nine through Sixty-Seven to the Second Amended and Restated
Limited Partnership Agreement
|
10.65
|
Home
Properties of New York, Inc. Amendment No. Three to 2000 Stock Benefit
Plan*
|
10.68 |
Home
Properties of New York, Inc. 2003 Stock Benefit
Plan* |
Exhibit
Number
|
Exhibit
|
10.69
|
Amendment
Number Two to Home Properties of New York, Inc. and Home Properties of New
York, L.P. Executive Retention Plan*
|
10.70
|
Employment
Agreement, dated as of May 17, 2004, between Home Properties, L.P., Home
Properties, Inc. and Edward J. Pettinella*
|
10.71
|
Amendment
Nos. Sixty-Eight through Seventy-Three to the Second Amended and Restated
Limited Partnership Agreement
|
10.72
|
Summary
of Non-Employee Director Compensation Effective January 1,
2008*
|
10.73
|
Summary
of Named Executive Officer Compensation for 2008*
|
10.74
|
Amendment
No. Three to Credit Agreement, dated April 1, 2004 between Home
Properties, L.P., certain lenders, and Manufacturers and Traders Trust
Company as Administrative Agent
|
10.76
|
Libor
Grid Note, dated November 23, 2004 from Home Properties, L.P. to
Manufacturers and Traders Trust Company
|
10.77
|
Mutual
Release, dated January 24, 2005, given by Home Properties, L.P. and Home
Properties, Inc. and Boston Capital Tax Credit Fund XIV, a Limited
Partnership, Boston Capital Tax Credit Fund XV, a Limited Partnership and
BCCC, Inc. relating to certain obligations pertaining to Green Meadows and
related Letter Agreement.
|
10.78
|
Amendment
No. Four to Credit Agreement, dated September 8, 2005 between Home
Properties, L.P., certain Lenders, and Manufacturers and Traders Trust
Company, as Administrative Agent
|
10.79
|
Agreement,
dated September 30, 2005, between General Electric Credit Equities, Inc.
and H.P. Knolls I Associates, L.P.
|
10.80
|
Agreement,
dated September 30, 2005, between General Electric Credit Equities, Inc.
and H.P. Knolls II Associates, L.P.
|
10.81
|
Amendments
Nos. Seventy-Four to through Seventy-Nine to the Second Amended and
Restated Limited Partnership
|
10.82
|
Amendment
No. Eighty to the Second Amended and Restated Limited Partnership
Agreement
|
10.83
|
Amendment
Nos. Eighty-One and Eighty-Two to the Second Amended and Restated Limited
Partnership Agreement
|
10.84
|
Amendment
Nos. Eighty-Three and Eighty-Four to the Second Amended and Restated
Limited Partnership Agreement
|
10.85
|
Amendment
Nos. Eighty-Five through Eighty-Seven to the Second Amended and Restated
Limited Partnership Agreement
|
10.86
|
Development
Agreement, dated March 27, 2006 between Nelson B. Leenhouts and Home
Properties, Inc.*
|
10.87
|
Amended
and Restated Employment Agreement, dated November 20, 2006 between Edward
J. Pettinella and Home Properties, Inc.*
|
10.88
|
Employment
Agreement between Nelson B. Leenhouts and Home Properties,
Inc.*
|
10.89
|
Second
Amended and Restated Incentive Compensation Plan*
|
10.90
|
Articles
of Merger of Home Properties Management, Inc. into Home Properties
Resident Services, Inc.
|
10.91
|
Purchase
Agreement, dated October 18, 2006 between Home Properties, Inc., Home
Properties, L.P. and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith and Bear Stearns & Co., Inc.
|
10.92
|
Amendment
Nos. Eighty-Eight and Eighty-Nine to the Second Amended and Restated
Limited Partnership
|
10.93
|
Amendment
No. Ninety to the Second Amended and Restated Limited
Partnership
|
Exhibit
Number
|
Exhibit
|
10.94
|
Amendment
Nos. Ninety-One to Ninety-Two to the Second Amended and Restated Limited
Partnership
|
10.95
|
Amendment
Nos. Ninety-Three to Ninety-Four to the Second Amended and Restated
Limited Partnership
|
11
|
Computation
of Per Share Earnings Schedule
|
21
|
List
of Subsidiaries of Home Properties, Inc.
|
23
|
Consent
of PricewaterhouseCoopers LLP
|
31.1
|
Section
302 Certification of Chief Executive Officer
|
31.2
|
Section
302 Certification of Chief Financial Officer
|
32.1**
|
Section
906 Certification of Chief Executive Officer
(furnished)
|
32.2**
|
Section
906 Certification of Chief Financial Officer
(furnished)
|
99
|
Additional
Exhibits - Debt Summary Schedule
|
*Management
contract or compensatory plan or arrangement required to be filed as an exhibit
to this Form 10-K pursuant to Item 15(b) of Form 10-K.
**These
exhibits are not incorporated by reference in any registration statement or
report which incorporates this Annual Report on Form 10-K for the year ended
December 31, 2007.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
|
HOME PROPERTIES, INC.
|
|
|
|
By:
|
/s/ Edward J. Pettinella
|
|
|
Edward
J. Pettinella
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
Date:
|
February 29,
2008
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the report has been
signed by the following persons on behalf of Home Properties, Inc. and in the
capacities and on the dates indicated.
Signature
|
|
Title
|
Date
|
|
|
|
|
/s/ Edward J.
Pettinella
|
|
Director,
President and Chief Executive Officer
|
February
29, 2008
|
Edward
J. Pettinella
|
|
|
|
|
|
|
|
/s/ David P.
Gardner
|
|
Executive
Vice President, Chief Financial Officer
|
February
29, 2008
|
David
P. Gardner
|
|
(Principal
Financial Officer)
|
|
|
|
|
|
/s/ Robert J.
Luken
|
|
Senior
Vice President, Chief Accounting Officer
|
February
29, 2008
|
Robert
J. Luken
|
|
and
Treasurer (Principal Accounting Officer)
|
|
|
|
|
|
/s/ Kenneth O.
Hall
|
|
Vice
President and Controller
|
February
29, 2008
|
Kenneth
O. Hall
|
|
|
|
|
|
|
|
/s/ Norman P.
Leenhouts
|
|
Director,
Co-Chairman of the Board of Directors
|
February
29, 2008
|
Norman
P. Leenhouts
|
|
|
|
|
|
|
|
/s/ Nelson B.
Leenhouts
|
|
Director,
Co-Chairman of the Board of Directors
|
February
29, 2008
|
Nelson
B. Leenhouts
|
|
|
|
|
|
|
|
/s/ Josh E.
Fidler
|
|
Director
|
February
29, 2008
|
Josh
E. Fidler
|
|
|
|
|
|
|
|
/s/ Alan L.
Gosule
|
|
Director
|
February
29, 2008
|
Alan
L. Gosule
|
|
|
|
|
|
|
|
/s/ Leonard F. Helbig,
III
|
|
Director
|
February
29, 2008
|
Leonard
F. Helbig, III
|
|
|
|
|
|
|
|
/s/ Roger W.
Kober
|
|
Director
|
February
29, 2008
|
Roger
W. Kober
|
|
|
|
|
|
|
|
/s/ Clifford W. Smith,
Jr.
|
|
Director
|
February
29, 2008
|
Clifford
W. Smith, Jr.
|
|
|
|
|
|
|
|
/s/ Paul L.
Smith
|
|
Director
|
February
29, 2008
|
Paul
L. Smith
|
|
|
|
|
|
|
|
/s/ Thomas S.
Summer
|
|
Director
|
February
29, 2008
|
Thomas
S. Summer
|
|
|
|
|
|
|
|
/s/ Amy L.
Tait
|
|
Director
|
February
29, 2008
|
Amy
L. Tait
|
|
|
|
This page intentionally left
blank
HOME
PROPERTIES, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
|
Page
|
|
|
|
68
|
|
|
|
|
as of December 31, 2007 and
2006
|
69
|
|
|
|
|
for the Years Ended December 31,
2007, 2006 and 2005
|
70
|
|
|
|
|
for the Years Ended December 31,
2007, 2006 and 2005
|
71
|
|
|
|
|
for the Years Ended December 31,
2007, 2006 and 2005
|
72
|
|
|
|
73
|
|
|
|
|
Valuation and Qualifying
Accounts
|
98
|
|
|
|
|
Real Estate and Accumulated
Depreciation
|
99
|
All other
schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
Report of Independent Registered Public Accounting
Firm
To the
Board of Directors and Shareholders
of Home
Properties, Inc.:
In our
opinion, the consolidated financial statements listed in the index appearing
under Item 15(a)(1) present fairly, in all material respects, the financial
position of Home Properties, Inc. and its subsidiaries (the “Company”) at
December 31, 2007 and 2006, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2007 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under Item 15(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also in our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007, based on criteria
established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company's management is responsible
for these financial statements and financial statement schedules, for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in Management's Annual Report on Internal Control Over Financial
Reporting under Item 9A. Our responsibility is to express opinions on
these financial statements, on the financial statement schedules, and on the
Company's internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis
for our opinions.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers
LLP
Boston,
Massachusetts
February
29, 2008
HOME
PROPERTIES, INC.
DECEMBER
31, 2007 and 2006
(Dollars
in thousands, except share and per share data)
|
|
2007
|
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
|
Real
estate:
|
|
|
|
|
|
|
Land
|
|
$ |
510,120 |
|
|
$ |
493,017 |
|
Construction
in progress
|
|
|
54,069 |
|
|
|
1,409 |
|
Buildings,
improvements and equipment
|
|
|
3,115,966 |
|
|
|
2,957,336 |
|
|
|
|
3,680,155 |
|
|
|
3,451,762 |
|
Less: accumulated
depreciation
|
|
|
(543,917 |
) |
|
|
(450,129 |
) |
Real
estate, net
|
|
|
3,136,238 |
|
|
|
3,001,633 |
|
Cash
and cash equivalents
|
|
|
6,109 |
|
|
|
118,212 |
|
Cash
in escrows
|
|
|
31,005 |
|
|
|
74,069 |
|
Accounts
receivable
|
|
|
11,109 |
|
|
|
9,287 |
|
Prepaid
expenses
|
|
|
15,560 |
|
|
|
15,059 |
|
Deferred
charges
|
|
|
12,371 |
|
|
|
13,619 |
|
Other
assets
|
|
|
4,031 |
|
|
|
8,539 |
|
Total
assets
|
|
$ |
3,216,423 |
|
|
$ |
3,240,418 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Mortgage
notes payable
|
|
$ |
1,986,789 |
|
|
$ |
1,924,313 |
|
Exchangeable
senior notes
|
|
|
200,000 |
|
|
|
200,000 |
|
Line
of credit
|
|
|
2,500 |
|
|
|
- |
|
Accounts
payable
|
|
|
18,616 |
|
|
|
20,797 |
|
Accrued
interest payable
|
|
|
10,984 |
|
|
|
10,473 |
|
Accrued
expenses and other liabilities
|
|
|
27,586 |
|
|
|
24,697 |
|
Security
deposits
|
|
|
22,826 |
|
|
|
21,979 |
|
Total
liabilities
|
|
|
2,269,301 |
|
|
|
2,202,259 |
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
279,061 |
|
|
|
282,542 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Cumulative
redeemable preferred stock, $.01 par value; 2,400,000 shares issued and
outstanding at December 31, 2006
|
|
|
- |
|
|
|
60,000 |
|
Common
stock, $.01 par value; 80,000,000 shares authorized; 32,600,614 and ;
33,103,247 shares issued and outstanding at December 31, 2007 and 2006,
respectively
|
|
|
326 |
|
|
|
331 |
|
Excess
stock, $.01 par value; 10,000,000 shares authorized; no shares issued or
outstanding
|
|
|
- |
|
|
|
- |
|
Additional
paid-in capital
|
|
|
853,358 |
|
|
|
852,036 |
|
Accumulated
other comprehensive income
|
|
|
- |
|
|
|
171 |
|
Distributions
in excess of accumulated earnings
|
|
|
(185,623 |
) |
|
|
(156,921 |
) |
Total
stockholders' equity
|
|
|
668,061 |
|
|
|
755,617 |
|
Total
liabilities and stockholders' equity
|
|
$ |
3,216,423 |
|
|
$ |
3,240,418 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
FOR THE
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Dollars
in thousands, except share and per share data)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$ |
464,324 |
|
|
$ |
408,119 |
|
|
$ |
365,854 |
|
Property
other income
|
|
|
37,777 |
|
|
|
26,877 |
|
|
|
18,904 |
|
Interest
income
|
|
|
1,963 |
|
|
|
1,761 |
|
|
|
581 |
|
Other
income
|
|
|
1,124 |
|
|
|
3,468 |
|
|
|
2,023 |
|
Total
revenues
|
|
|
505,188 |
|
|
|
440,225 |
|
|
|
387,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
and maintenance
|
|
|
211,126 |
|
|
|
184,860 |
|
|
|
169,015 |
|
General
and administrative
|
|
|
23,413 |
|
|
|
22,626 |
|
|
|
19,652 |
|
Interest
|
|
|
119,383 |
|
|
|
104,735 |
|
|
|
90,079 |
|
Depreciation
and amortization
|
|
|
110,329 |
|
|
|
92,902 |
|
|
|
78,125 |
|
Impairment
of assets held as General Partner
|
|
|
- |
|
|
|
- |
|
|
|
400 |
|
Total
expenses
|
|
|
464,251 |
|
|
|
405,123 |
|
|
|
357,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
40,937 |
|
|
|
35,102 |
|
|
|
30,091 |
|
Minority
interest in operating partnership
|
|
|
(10,824 |
) |
|
|
(8,847 |
) |
|
|
(7,852 |
) |
Income
from continuing operations
|
|
|
30,113 |
|
|
|
26,255 |
|
|
|
22,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations, net of $542, $2,714 and $2,605, in 2007, 2006 and 2005
allocated to minority interest, respectively
|
|
|
1,354 |
|
|
|
5,482 |
|
|
|
5,298 |
|
Gain
on disposition of property, net of $12,049, $31,766 and $26,733 in 2007,
2006 and 2005 allocated to minority interest, respectively
|
|
|
30,077 |
|
|
|
78,748 |
|
|
|
53,975 |
|
Discontinued
operations
|
|
|
31,431 |
|
|
|
84,230 |
|
|
|
59,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
61,544 |
|
|
|
110,485 |
|
|
|
81,512 |
|
Preferred
dividends
|
|
|
(1,290 |
) |
|
|
(5,400 |
) |
|
|
(6,279 |
) |
Preferred
stock issuance costs write-off
|
|
|
(1,902 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
$ |
58,352 |
|
|
$ |
105,085 |
|
|
$ |
75,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.81 |
|
|
$ |
0.64 |
|
|
$ |
0.50 |
|
Discontinued
operations
|
|
|
0.95 |
|
|
|
2.57 |
|
|
|
1.85 |
|
Net
income available to common shareholders
|
|
$ |
1.76 |
|
|
$ |
3.21 |
|
|
$ |
2.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.80 |
|
|
$ |
0.62 |
|
|
$ |
0.49 |
|
Discontinued
operations
|
|
|
0.93 |
|
|
|
2.53 |
|
|
|
1.84 |
|
Net
income available to common shareholders
|
|
$ |
1.73 |
|
|
$ |
3.15 |
|
|
$ |
2.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
33,130,067 |
|
|
|
32,697,794 |
|
|
|
31,962,082 |
|
Diluted
|
|
|
33,794,526 |
|
|
|
33,337,557 |
|
|
|
32,328,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share
|
|
$ |
2.61 |
|
|
$ |
2.57 |
|
|
$ |
2.53 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME
FOR THE
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Dollars
in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
Accumulated
|
|
|
|
|
|
|
Stock
at
|
|
|
|
|
|
|
|
|
Additional
|
|
|
in
Excess of
|
|
|
Other
|
|
|
|
|
|
|
Liquidation
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Preference
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Totals
|
|
Balance,
January 1, 2005
|
|
$ |
85,000 |
|
|
|
32,625,413 |
|
|
$ |
326 |
|
|
$ |
807,212 |
|
|
$ |
(171,754 |
) |
|
$ |
(362 |
) |
|
$ |
720,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
81,512 |
|
|
|
- |
|
|
|
81,512 |
|
Change
in fair value of hedge
instruments, net of minority
interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
568 |
|
|
|
568 |
|
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
82,080 |
|
Issuance
of common stock, net
|
|
|
- |
|
|
|
358,737 |
|
|
|
4 |
|
|
|
12,845 |
|
|
|
- |
|
|
|
- |
|
|
|
12,849 |
|
Repurchase
of common stock
|
|
|
- |
|
|
|
(2,850,882 |
) |
|
|
(28 |
) |
|
|
(114,737 |
) |
|
|
- |
|
|
|
- |
|
|
|
(114,765 |
) |
Conversion
of Series D preferred stock
for common stock
|
|
|
(25,000 |
) |
|
|
833,333 |
|
|
|
8 |
|
|
|
24,992 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Conversion
of UPREIT Units for stock
|
|
|
- |
|
|
|
217,655 |
|
|
|
2 |
|
|
|
9,228 |
|
|
|
- |
|
|
|
- |
|
|
|
9,230 |
|
Adjustment
of minority interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33,856 |
|
|
|
- |
|
|
|
- |
|
|
|
33,856 |
|
Preferred
dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,279 |
) |
|
|
- |
|
|
|
(6,279 |
) |
Dividends
paid ($2.53 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(80,581 |
) |
|
|
- |
|
|
|
(80,581 |
) |
Balance,
December 31, 2005
|
|
|
60,000 |
|
|
|
31,184,256 |
|
|
|
312 |
|
|
|
773,396 |
|
|
|
(177,102 |
) |
|
|
206 |
|
|
|
656,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
110,485 |
|
|
|
- |
|
|
|
110,485 |
|
Change
in fair value of hedge
instruments, net of minority
interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(35 |
) |
|
|
(35 |
) |
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
110,450 |
|
Issuance
of common stock, net
|
|
|
- |
|
|
|
832,687 |
|
|
|
8 |
|
|
|
31,674 |
|
|
|
- |
|
|
|
- |
|
|
|
31,682 |
|
Repurchase
of common stock
|
|
|
- |
|
|
|
(2,683,429 |
) |
|
|
(26 |
) |
|
|
(146,273 |
) |
|
|
- |
|
|
|
- |
|
|
|
(146,299 |
) |
Conversion
of UPREIT Units for stock
|
|
|
- |
|
|
|
3,769,733 |
|
|
|
37 |
|
|
|
195,750 |
|
|
|
- |
|
|
|
- |
|
|
|
195,787 |
|
Adjustment
of minority interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,511 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,511 |
) |
Preferred
dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,400 |
) |
|
|
- |
|
|
|
(5,400 |
) |
Dividends
paid ($2.57 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(84,904 |
) |
|
|
- |
|
|
|
(84,904 |
) |
Balance,
December 31, 2006
|
|
|
60,000 |
|
|
|
33,103,247 |
|
|
|
331 |
|
|
|
852,036 |
|
|
|
(156,921 |
) |
|
|
171 |
|
|
|
755,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
61,544 |
|
|
|
- |
|
|
|
61,544 |
|
Change
in fair value of hedge
instruments, net of minority
interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(171 |
) |
|
|
(171 |
) |
Comprehensive
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
61,373 |
|
Issuance
of common stock, net
|
|
|
- |
|
|
|
318,318 |
|
|
|
3 |
|
|
|
15,553 |
|
|
|
- |
|
|
|
- |
|
|
|
15,556 |
|
Repurchase
of common stock
|
|
|
- |
|
|
|
(1,299,269 |
) |
|
|
(13 |
) |
|
|
(61,217 |
) |
|
|
- |
|
|
|
- |
|
|
|
(61,230 |
) |
Redemption
of preferred stock
|
|
|
(60,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
1,902 |
|
|
|
(1,902 |
) |
|
|
- |
|
|
|
(60,000 |
) |
Conversion
of UPREIT Units for stock
|
|
|
- |
|
|
|
478,318 |
|
|
|
5 |
|
|
|
26,495 |
|
|
|
- |
|
|
|
- |
|
|
|
26,500 |
|
Adjustment
of minority interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,589 |
|
|
|
- |
|
|
|
- |
|
|
|
18,589 |
|
Preferred
dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,290 |
) |
|
|
- |
|
|
|
(1,290 |
) |
Dividends
paid ($2.61 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(87,054 |
) |
|
|
- |
|
|
|
(87,054 |
) |
Balance,
December 31, 2007
|
|
$ |
- |
|
|
|
32,600,614 |
|
|
$ |
326 |
|
|
$ |
853,358 |
|
|
$ |
(185,623 |
) |
|
$ |
- |
|
|
$ |
668,061 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
FOR THE
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(Dollars
in thousands)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
61,544 |
|
|
$ |
110,485 |
|
|
$ |
81,512 |
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income allocated to minority
interest
|
|
|
23,415 |
|
|
|
43,327 |
|
|
|
37,190 |
|
Depreciation and
amortization
|
|
|
113,448 |
|
|
|
103,333 |
|
|
|
100,584 |
|
Impairment of assets held as
General Partner
|
|
|
- |
|
|
|
- |
|
|
|
400 |
|
Impairment of real
property
|
|
|
- |
|
|
|
- |
|
|
|
7,325 |
|
Gain on disposition of
property and business
|
|
|
(42,126 |
) |
|
|
(110,514 |
) |
|
|
(81,679 |
) |
Issuance of restricted stock,
compensation cost of stock options
and deferred
compensation
|
|
|
5,869 |
|
|
|
4,961 |
|
|
|
2,662 |
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash held in
escrows
|
|
|
993 |
|
|
|
1,863 |
|
|
|
3,519 |
|
Other assets
|
|
|
1,154 |
|
|
|
4,969 |
|
|
|
(8,423 |
) |
Accounts payable and accrued
liabilities
|
|
|
(1,739 |
) |
|
|
4,572 |
|
|
|
(6,624 |
) |
Total
adjustments
|
|
|
101,014 |
|
|
|
52,511 |
|
|
|
54,954 |
|
Net
cash provided by operating activities
|
|
|
162,558 |
|
|
|
162,996 |
|
|
|
136,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of properties and other assets, net of mortgage notes assumed and UPREIT
Units issued
|
|
|
(154,196 |
) |
|
|
(188,004 |
) |
|
|
(219,852 |
) |
Additions to
properties
|
|
|
(101,688 |
) |
|
|
(101,839 |
) |
|
|
(98,917 |
) |
Proceeds
from sale of properties and business, net
|
|
|
126,557 |
|
|
|
488,457 |
|
|
|
139,073 |
|
Withdrawals from (additions
to) funds held in escrow, net
|
|
|
41,774 |
|
|
|
(38,961 |
) |
|
|
(248 |
) |
Net cash provided by (used in)
investing activities
|
|
|
(87,553 |
) |
|
|
159,653 |
|
|
|
(179,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of exchangeable senior notes, net
|
|
|
- |
|
|
|
195,779 |
|
|
|
- |
|
Proceeds from sale of common
stock, net
|
|
|
9,687 |
|
|
|
26,721 |
|
|
|
10,185 |
|
Repurchase of Series F
preferred stock
|
|
|
(60,000 |
) |
|
|
- |
|
|
|
- |
|
Repurchase of common
stock
|
|
|
(61,230 |
) |
|
|
(146,299 |
) |
|
|
(114,765 |
) |
Proceeds from mortgage notes
payable
|
|
|
244,797 |
|
|
|
202,894 |
|
|
|
370,752 |
|
Payments of mortgage notes
payable
|
|
|
(198,405 |
) |
|
|
(279,135 |
) |
|
|
(119,939 |
) |
Proceeds from line of
credit
|
|
|
248,000 |
|
|
|
379,800 |
|
|
|
376,370 |
|
Payments on line of
credit
|
|
|
(245,500 |
) |
|
|
(461,800 |
) |
|
|
(352,370 |
) |
Payments of deferred loan
costs
|
|
|
(1,908 |
) |
|
|
(1,842 |
) |
|
|
(2,991 |
) |
Withdrawals from (additions
to) cash escrows, net
|
|
|
332 |
|
|
|
137 |
|
|
|
(159 |
) |
Dividends and distributions
paid
|
|
|
(122,881 |
) |
|
|
(126,083 |
) |
|
|
(126,139 |
) |
Net cash provided by (used in)
financing activities
|
|
|
(187,108 |
) |
|
|
(209,828 |
) |
|
|
40,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(112,103 |
) |
|
|
112,821 |
|
|
|
(2,534 |
) |
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of
year
|
|
|
118,212 |
|
|
|
5,391 |
|
|
|
7,925 |
|
End of year
|
|
$ |
6,109 |
|
|
$ |
118,212 |
|
|
$ |
5,391 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
1 ORGANIZATION
AND BASIS OF PRESENTATION
Organization
Home
Properties, Inc. (the "Company ") was formed in November 1993, as a Maryland
corporation and is engaged primarily in the ownership, management, acquisition,
rehabilitation and development of residential apartment communities primarily in
select Northeast, Mid-Atlantic and Southeast Florida regions of the United
States. The Company conducts its business through Home Properties,
L.P. (the "Operating Partnership"), a New York limited
partnership. As of December 31, 2007, the Company operated 125
apartment communities with 38,646 apartments. Of this total, the
Company owned 123 communities, consisting of 37,496 apartments, managed as
general partner one partnership that owned 868 apartments, and fee managed one
community, consisting of 282 apartments, for a third party.
Basis
of Presentation
The
accompanying consolidated financial statements include the accounts of the
Company and its ownership of 70.8% of the limited partnership units in the
Operating Partnership ("UPREIT Units") at December 31, 2007 (71.4% at December
31, 2006). The remaining 29.2% is reflected as Minority
Interest in these consolidated financial statements at December 31, 2007 (28.6%
at December 31, 2006). The Company owns a 1.0% general partner
interest in the Operating Partnership and the remainder indirectly as a limited
partner through its wholly owned subsidiary, Home Properties I, LLC, which owns
100% of Home Properties Trust, which is the limited partner. Home
Properties Trust was formed in September 1997, as a Maryland real estate trust
and as a qualified REIT subsidiary ("QRS") and owns the Company's share of the
limited partner interests in the Operating Partnership. For financing
purposes, the Company has formed a limited liability company (the "LLC") and a
partnership (the "Financing Partnership"), which beneficially own certain
apartment communities encumbered by mortgage indebtedness. The LLC is
wholly owned by the Operating Partnership. The Financing Partnership
is owned 99.9% by the Operating Partnership and 0.1% by the QRS.
The
accompanying consolidated financial statements include the accounts of Home
Properties Management, Inc. (“HPM”) and Home Properties Resident Services, Inc.
(“HPRS”), (altogether, the “Management Companies”). The Management
Companies are wholly owned subsidiaries of the Company. On
November 21, 2006, HPM was merged into HPRS, with HPRS the surviving
entity. All significant inter-company balances and transactions have
been eliminated in these consolidated financial statements.
2 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Real
Estate
Real
estate is recorded at cost. Costs related to the acquisition,
development, construction and improvement of properties are
capitalized. Recurring capital replacements typically include
carpeting and tile, appliances, HVAC equipment, new roofs, site improvements and
various exterior building improvements. Non-recurring upgrades
include, among other items, community centers, new appliances, new windows,
kitchens and bathrooms. Interest costs are capitalized until
construction is substantially complete. There was $3,441, $1,087 and
$1,096 of interest capitalized in 2007, 2006 and 2005,
respectively. Salaries and related costs capitalized for the years
ended December 31, 2007, 2006 and 2005 were $1,967, $2,097 and $2,135,
respectively. When retired or otherwise disposed of, the related
asset cost and accumulated depreciation are cleared from the respective accounts
and the net difference, less any amount realized from disposition, is reflected
in income. Ordinary repairs and maintenance that do not extend the
life of the asset are expensed as incurred.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
2 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Real
Estate (Continued)
Management
reviews its long-lived assets used in operations for impairment when, in
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long Lived Assets (“SFAS 144”), there is an event or change
in circumstances that indicates an impairment in value. An asset is
considered impaired when the undiscounted future cash flows are not sufficient
to recover the asset's carrying value. If such impairment is present,
an impairment loss is recognized based on the excess of the carrying amount of
the asset over its fair value. The Company records impairment losses
and reduces the carrying amounts of assets held for sale when the carrying
amounts exceed the estimated selling proceeds less the costs to
sell.
The
Company accounts for its acquisitions of investments in real estate in
accordance with SFAS No. 141, Business Combinations (“SFAS
141”), which requires the fair value of the real estate acquired to be allocated
to the acquired tangible assets, consisting of land, building, and personal
property and identified intangible assets and liabilities, consisting of the
value of above-market and below-market leases, value of in-place leases and
value of resident relationships, based in each case on their fair
values. The Company considers acquisitions of operating real estate
assets to be businesses as that term is contemplated in Emerging Issues Task
Force Issue No. 98-3, Determining Whether a Nonmonetary
Transaction Involves Receipt of Productive Assets or of a
Business.
The
Company allocates purchase price to the fair value of the tangible assets of an
acquired property (which includes the land, building, and personal property)
determined by valuing the property as if it were vacant. The
as-if-vacant value is allocated to land, buildings, and personal property based
on management's determination of the relative fair values of these
assets.
Above-market
and below-market in-place lease values for acquired properties are recorded
based on the present value (using an interest rate which reflects the risks
associated with the leases acquired) of the difference between (i) the
contractual amounts to be paid pursuant to the in-place leases and (ii)
management's estimate of fair market lease rates for the corresponding in-place
leases, measured over a period equal to the remaining non-cancelable term of the
lease. The capitalized above-market lease values are included in
other assets and are amortized as a reduction of rental income over the
remaining non-cancelable terms of the respective leases. The
capitalized below-market lease values are included in accrued expenses and other
liabilities and are amortized as an increase to rental income over the initial
term of the respective leases.
Other
intangible assets acquired include amounts for in-place lease values that are
based upon the Company's evaluation of the specific characteristics of the
leases. Factors considered in these analyses include an estimate of
carrying costs during hypothetical expected lease-up periods considering current
market conditions, and costs to execute similar leases. The Company
also considers information obtained about each property as a result of its
pre-acquisition due diligence, marketing and leasing activities in estimating
the fair value of the tangible and intangible assets acquired. In
estimating carrying costs, management also includes real estate taxes, insurance
and other operating expenses and estimates of lost rentals at market rates
during the expected lease-up periods depending on the property
acquired.
The total
amount of other intangible assets acquired is further allocated to resident
relationships, which includes intangible values based on management's evaluation
of the specific characteristics of the residential leases and the Company's
resident retention history.
The value
of in-place leases and resident relationships are amortized and included in
depreciation and amortization expense over the initial term of the respective
leases.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Real
Estate (Continued)
The
exchange of minority interests for shares of the Company's common stock are
recorded under the purchase method with assets acquired reflected at the fair
market value of the Company's common stock on the date of
exchange. The acquisition amounts are allocated to the underlying
assets based on their estimated fair values. During 2007 and 2006,
there were 478,318 and 3,769,733 shares of UPREIT Units converted to common
stock, respectively. The Company made an adjustment in the amount of
$16,475 and $124,631, respectively, to record the fair market value of the
conversions.
Depreciation
Properties
are depreciated using a straight-line method over the estimated useful lives of
the assets as follows:
Land
improvements
|
3-20
years
|
Buildings
and improvements
|
3-40
years
|
Furniture,
fixtures and equipment
|
5-10
years
|
Computer
software
|
5
years
|
Depreciation
expense charged to operations was $107,987, $90,929 and $77,327 from continuing
operations and $2,255, $8,778 and $21,984 from discontinued operations for the
years ended December 31, 2007, 2006 and 2005, respectively.
Cash
and Cash Equivalents
Cash and
cash equivalents include all cash and highly liquid investments purchased with
original maturities of three months or less. The Company estimates
that the fair value of cash equivalents approximates the carrying value due to
the relatively short maturity of these instruments.
Cash
in Escrows
Cash in
escrows consists of cash restricted under the terms of various loan agreements
to be used for the payment of property taxes and insurance as well as required
replacement reserves, resident security deposits for residential properties and
funds held in escrow from tax-free exchanges.
Accounts
Receivable and Allowance for Doubtful Receivables
Accounts
receivable are generally comprised of amounts receivable from residents and
other miscellaneous receivables from non-affiliated entities. We
evaluate the collectibility of accounts receivable from residents and establish
an allowance, after the application of security deposits, for accounts greater
than 60 days past due for current residents and all receivables due from former
residents. The allowance for doubtful receivables was $1,699, $984
and $513 as of December 31, 2007, 2006 and 2005, respectively.
Deferred
Charges
Costs
relating to the financing of properties are deferred and amortized over the life
of the related financing agreement. The straight-line method, which
approximates the effective interest method, is used to amortize all financing
costs; such amortization is reflected as interest expense in the consolidated
statement of operations. The financing agreement terms range from
1-18 years. Accumulated amortization was $9,148, $7,421and $5,832, as
of December 31, 2007, 2006 and 2005, respectively.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
2 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible
Assets
Intangible
assets of $8,994, $8,080 and $5,080 at December 31, 2007, 2006 and 2005,
respectively, included in Other Assets, consist primarily of intangible assets
recorded in connection with SFAS 141. Intangible assets associated
with SFAS 141 are amortized on the straight-line basis over their estimated
useful lives of 5 months to 3 years. Accumulated amortization of
intangible assets was $7,038, $4,714 and $2,797 as of December 31, 2007, 2006
and 2005, respectively. Amortization expense charged to operations
was $2,342, $1,973 and $798 from continuing operations and $1, $15 and $6 from
discontinued operations for the years ended December 31, 2007, 2006
and 2005, respectively. The carrying value of intangible
assets is periodically reviewed by the Company and impairments are recognized
when the expected future operating cash flows derived from such intangible
assets are less than their carrying value.
Revenue
Recognition
The
Operating Partnership leases its residential apartment units under leases with
terms generally one year or less. Rental income is recognized on a
straight-line basis over the related lease term. As a result,
deferred rents receivable are created when rental income is recognized during
the concession period of certain negotiated leases and amortized over the
remaining term of the lease. In accordance with SFAS 141, the Company recognizes
rental revenue of acquired in-place "above and below" market leases at their
fair value over the weighted average remaining lease term. Property other
income, which consists primarily of income from operation of laundry facilities,
utility recovery, administrative fees, garage and carport rentals and
miscellaneous charges to residents, is recognized when earned (when the services
are provided, or when the resident incurs the charge).
Property
management fees are recognized when earned based on a contractual percentage of
net monthly cash collected on rental income.
Other
Income
Other
income for the years ended December 31, 2007, 2006 and 2005 primarily reflects
management and other real estate service fees.
Gains
on Real Estate Sales
Gains on
disposition of properties are recognized using the full accrual method in
accordance with the provisions of SFAS No. 66, Accounting for Real Estate
Sales, provided that various criteria relating to the terms of sale and
any subsequent involvement by the Company with the properties sold
are met.
Advertising
Advertising
expenses are charged to operations during the year in which they were
incurred. Advertising expenses incurred and charged to operations
were $4,983, $4,337 and $4,514 from continuing operations, and $139, $1,335 and
$2,094 from discontinued operations, for the years ended December 31, 2007, 2006
and 2005, respectively.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
2 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Federal
Income Taxes
The
Company has elected to be taxed as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, as amended, commencing with the taxable year
ended December 31, 1994. As a result, the Company generally is not subject
to Federal or State income taxation at the corporate level to the extent it
distributes annually at least 90% of its REIT taxable income to its shareholders
and satisfies certain other requirements. For the years ended
December 31, 2007, 2006 and 2005, the Company distributed in excess of 100% of
its taxable income; accordingly, no provision has been made for federal income
taxes in the accompanying consolidated financial
statements. Stockholders of the Company are taxed on dividends and
must report distributions from the Company as either ordinary income, capital
gains, or as return of capital (Note 8).
The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (“FIN 48”) on January 1, 2007. FIN 48 addresses the
recognition and measurement of assets and liabilities associated with tax
positions taken or expected to be taken in a tax return. As a result
of the adoption of FIN 48, the Company reviewed its potential uncertain tax
positions that would qualify under FIN 48 and made no adjustments to its
existing financial and tax accounting treatment.
SFAS No.
109, Accounting for Income
Taxes, requires a public enterprise to disclose the aggregate difference
in the basis of its net assets for financial and tax reporting
purposes. The tax basis of assets is less than the amounts reported
in the accompanying consolidated financial statements by approximately $580,925
and $554,000 at December 31, 2007 and 2006, respectively.
The
following table reconciles net income to taxable income for the years ended
December 31, 2007, 2006 and 2005:
|
2007
|
2006
|
2005
|
Net
income
|
$
61,544
|
$110,485
|
$
81,512
|
Add
back: Net loss of taxable REIT Subsidiaries included in net
income above
|
122
|
243
|
172
|
Deduct:
Net income of taxable REIT subsidiaries included in net income
above
|
-
|
(39)
|
(27)
|
Net
income from REIT operations
|
61,666
|
110,689
|
81,657
|
Add:
Book depreciation and amortization
|
78,369
|
75,151
|
68,814
|
Less:
Tax depreciation and amortization
|
(79,880)
|
(68,874)
|
(68,426)
|
Book/tax
difference on gains/losses from capital transactions
|
12,579
|
(49,691)
|
(45,906)
|
Other
book/tax differences, net
|
(7,292)
|
(14,094)
|
(6,450)
|
Adjusted
taxable income subject to 90% REIT
dividend requirement
|
$ 65,442
|
$ 53,181
|
$
29,689
|
The
Company made actual distributions in excess of 100% of taxable income before
capital gains. All adjustments to net income from REIT operations are
net of amounts attributable to minority interest and the taxable REIT
subsidiary, HPRS.
Included
in total assets on the Consolidated Balance Sheets are deferred tax assets of
$10,149 and $10,079 as of December 31, 2007 and 2006,
respectively. Management does not believe it is more likely than not
that these deferred assets will be used, and accordingly has recorded a reserve
against the deferred tax asset of $10,149 and $10,078 as of December 31, 2007
and 2006, respectively. The deferred tax assets are associated with
HPRS who performs certain of the residential and development activities of the
Company. HPRS historically provided commercial management services
and provided loan advances to affordable housing entities owned through general
partnership interests. As these activities are no longer provided,
Management does not currently believe there is a source for future material
taxable earnings for HPRS that would give rise to value for the deferred tax
assets.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
2 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings
Per Share
Basic
Earnings Per Share ("EPS") is computed as net income available to common
shareholders divided by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that
could occur from common shares issuable through stock-based compensation
including stock options (using the treasury stock method) and the conversion of
any cumulative convertible preferred stock. The exchange of an UPREIT
Unit for common stock will have no effect on diluted EPS as unitholders and
stockholders effectively share equally in the net income of the Operating
Partnership.
Income
from continuing operations is the same for both the basic and diluted EPS
calculation. The reconciliation of the basic and diluted earnings per
share for the years ended December 31, 2007, 2006 and 2005, is as
follows:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Income
from continuing operations
|
|
$ |
30,113 |
|
|
$ |
26,255 |
|
|
$ |
22,239 |
|
Less:
Preferred dividends
|
|
|
(1,290 |
) |
|
|
(5,400 |
) |
|
|
(6,279 |
) |
Less:
Preferred stock issuance costs write-off
|
|
|
(1,902 |
) |
|
|
- |
|
|
|
- |
|
Basic
and Diluted – Income from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
applicable
to common shareholders
|
|
|
26,921 |
|
|
|
20,855 |
|
|
|
15,960 |
|
Discontinued
operations
|
|
|
31,431 |
|
|
|
84,230 |
|
|
|
59,273 |
|
Net
income available to common shareholders
|
|
$ |
58,352 |
|
|
$ |
105,085 |
|
|
$ |
75,233 |
|
Basic
weighted average number of shares outstanding
|
|
|
33,130,067 |
|
|
|
32,697,794 |
|
|
|
31,962,082 |
|
Effect
of dilutive stock options
|
|
|
537,703 |
|
|
|
593,308 |
|
|
|
324,268 |
|
Effect
of phantom and restricted shares
|
|
|
126,756 |
|
|
|
46,455 |
|
|
|
41,755 |
|
Diluted
weighted average number of shares outstanding
|
|
|
33,794,526 |
|
|
|
33,337,557 |
|
|
|
32,328,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.81 |
|
|
$ |
0.64 |
|
|
$ |
0.50 |
|
Discontinued
operations
|
|
|
0.95 |
|
|
|
2.57 |
|
|
|
1.85 |
|
Net
income available to common shareholders
|
|
$ |
1.76 |
|
|
$ |
3.21 |
|
|
$ |
2.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.80 |
|
|
$ |
0.62 |
|
|
$ |
0.49 |
|
Discontinued
operations
|
|
|
0.93 |
|
|
|
2.53 |
|
|
|
1.84 |
|
Net
income available to common shareholders
|
|
$ |
1.73 |
|
|
$ |
3.15 |
|
|
$ |
2.33 |
|
Unexercised
stock options to purchase 1,028,597, 18,900 and 539,500 shares of the Company's
common stock were not included in the computations of diluted EPS because the
options' exercise prices were greater than the average market price of the
Company's stock during the years ended December 31, 2007, 2006 and 2005,
respectively. For the year ended December 31, 2005 (until the
date of the conversion), the 833,333 common stock equivalents on an as-converted
basis of the Series D Convertible Cumulative Preferred Stock had an antidilutive
effect and are not included in the computation of diluted EPS. To the
extent the preferred stock was converted, the common shares would be included in
outstanding shares from the date of conversion. In conjunction
with the issuance of the Exchangeable Senior Notes, there are 490,880 potential
shares issuable under certain circumstances, of which none are considered
dilutive as of December 31, 2007 and 2006.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
2 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent
Accounting Pronouncements
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"). SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 applies
under other accounting pronouncements that require or permit fair value
measurements; the FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement
attribute. Accordingly, SFAS 157 does not require any new fair value
measurements. This statement is effective in fiscal years beginning
after November 15, 2007, except for non-financial assets and non-financial
liabilities that are not recognized or disclosed at fair value on a recurring
basis, for which the effective date is fiscal years beginning after November 15,
2008. The Company is currently evaluating the impact and believes
that the adoption of SFAS 157 will not have a material effect on its financial
position and results of operations.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities Including an Amendment of FASB Statement No.
115 (“SFAS 159”). SFAS 159 is effective for financial
statements issued for fiscal years beginning after November 15,
2007. Under SFAS 159, entities are now permitted to measure many
financial instruments and certain other assets and liabilities at fair value on
an instrument-by-instrument basis under a fair value option granted in SFAS
159. Excluded from the scope of SFAS 159 are real estate assets and
interests in variable interest entities. The Company is currently
evaluating the impact and believes that the adoption of SFAS 159 will not have a
material effect on its financial position and results of
operations.
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS
141R”), which establishes principles and requirements for how the acquirer shall
recognize and measure in its financial statements the identifiable assets
acquired, liabilities assumed, any non-controlling interest in the acquiree and
goodwill acquired in a business combination. This statement is
effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company is currently assessing the
potential impact that the adoption of SFAS 141R will have on its financial
position and results of operations.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51 (“SFAS
160”), which establishes and expands accounting and reporting standards for
minority interests, which will be re-characterized as non-controlling interests,
in a subsidiary and the deconsolidation of a subsidiary. SFAS 160 is
effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. This statement is effective for fiscal years
beginning on or after December 15, 2008. The Company is currently
assessing the potential impact that the adoption of SFAS 160 will have on its
financial position and results of operations.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
3 VARIABLE
INTEREST ENTITIES
Effective
March 31, 2004, the Company adopted FASB Interpretation No. 46R, Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51 – Consolidated Financial
Statements. The Company had made the determination that all 41
of the remaining limited partnerships at the time were VIEs.
The
Company determined that it was not the primary beneficiary in seven partnerships
syndicated under U.S. Department of Housing and Urban Development subsidy
programs, all of which had been sold as of December 31,
2005. These investments were accounted for under the equity method
through their sale. The Company recorded its allocable share of the
respective partnership's income or loss based on the terms of the
agreements. To the extent it was determined that the LPs could not
absorb their share of the losses, if any, the GP recorded the LPs share of such
losses. The Company absorbed such losses to the extent the
Company had outstanding loans or advances and the limited partner had no
remaining capital account.
The
Company had further determined that it was the primary beneficiary in 34 of the
VIEs and, therefore, consolidated these entities effective March 31,
2004. During 2005, the Company closed on the sale of all but one
VIE. The one remaining VIE is not considered held for sale and
is included in the Consolidated Statement of Operations for the years ended
December 31, 2007, 2006 and 2005. The effect on the Consolidated
Balance Sheets of including this VIE as of December 31, 2007 and 2006 includes
total assets of $19,241 and $20,473, total liabilities of $17,703 and $17,892
and minority interest of $1,538 and $2,581, respectively.
As
general partner, the Company manages the day-to-day operations of this
partnership for a management fee. In addition, the Company has
certain operating deficit and tax credit guarantees to its limited
partner. The Company is responsible to fund operating deficits to the
extent there are any and can receive operating incentive awards when cash flow
reaches certain levels.
In
December, 2004, the Company recorded an obligation to repurchase the limited
partner’s interests in two VIEs in satisfaction of any tax credit guarantees or
other obligations to that partner for $5,700, resulting in a loss of $5,000
included in “gain on disposition of property” as part of “Discontinued
operations.” The transfer of the partnership interests was effective in January,
2005. In connection with the Company’s decision to dispose of the
property through a transfer of deed in lieu of foreclosure, the Company
performed a valuation analysis on the underlying real estate, and as a result,
recorded a $7,300 impairment of real estate during the first quarter of 2005 to
adjust the net book value of the property to the Company’s estimated fair market
value. This impairment is included as part of “Discontinued
operations” in “Income from operations.” Finally, on September 30,
2005, the deed was transferred to the new mortgage holder in lieu of foreclosure
resulting in a gain on sale of real estate of $7,700, included in “gain on
disposition of property” as part of “Discontinued operations.”
At the
time the property was marketed for sale, based upon the Company’s estimate of
fair market value, a $400 investment impairment charge was recorded and included
in “Impairment of assets held as general partner” in the period ended
December 31, 2005 for this one remaining VIE.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
4 MORTGAGE
NOTES PAYABLE
The
Company's mortgage notes payable are summarized as follows:
|
|
2007
|
|
|
2006
|
|
Fixed
rate mortgage notes payable
|
|
$ |
1,958,104 |
|
|
$ |
1,895,448 |
|
Variable
rate mortgage notes payable
|
|
|
28,685 |
|
|
|
28,865 |
|
Mortgage notes
payable
|
|
$ |
1,986,789 |
|
|
$ |
1,924,313 |
|
For 2007
and 2006, mortgage notes payable are collateralized by certain apartment
communities. The mortgage notes payable outstanding as of December
31, 2007 mature at various dates from 2008 through 2042, with a weighted average
remaining term of six and one-half years. The weighted average
interest rate of the Company's fixed rate notes was 5.76% and 5.77% at December
31, 2007 and 2006, respectively. The weighted average interest rate
of the Company's variable rate notes was 4.63% and 4.95% at December 31, 2007
and 2006, respectively.
Principal
payments on the mortgage notes payable for years subsequent to December 31, 2007
are as follows:
2008
|
|
$ |
121,461 |
|
2009
|
|
|
69,327 |
|
2010
|
|
|
367,173 |
|
2011
|
|
|
285,716 |
|
2012
|
|
|
182,142 |
|
Thereafter
|
|
|
960,970 |
|
|
|
$ |
1,986,789 |
|
The
Company determines the fair value of the mortgage notes payable based on the
discounted future cash flows at a discount rate that approximates the Company's
current effective borrowing rate for comparable loans. Based on this
analysis, the Company has determined that the fair value of the mortgage notes
payable approximates $2,017,469 and $1,930,555 at December 31, 2007 and 2006,
respectively.
At
December 31, 2007 and 2006, the consolidated mortgage balance of $1,986,789 and
$1,924,313, respectively, included mortgage notes payable related to the
Company’s VIE consolidated in connection with the Company’s adoption of FIN 46R,
in the amount of $16,524 and $16,763, respectively.
Prepayment
penalties of $759, $8,621 and $147 were incurred for the years ended
December 31, 2007, 2006 and 2005, respectively. For 2007, a
prepayment penalty of $754 was incurred in connection with the sale of a
property and is included in discontinued operations. A penalty of $5 was
incurred in connection with the repayment of a mortgage and is included in
interest expense. For 2006, the prepayment penalties were incurred in
connection with the sale of property and are included in discontinued
operations. For 2005, a prepayment penalty was incurred in connection
with the repayment of a mortgage and is included in interest
expense.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
5 EXCHANGEABLE
SENIOR NOTES
In
October 2006, the Company issued $200,000 of exchangeable senior notes under an
Indenture Agreement (the “Indenture”), with a coupon rate of
4.125%. The notes are exchangeable into cash equal to the principal
amount of the notes and, at the Company’s option, cash or common stock for the
exchange value, to the extent that the market price of common stock exceeds the
initial exchange price of $73.34 per share, subject to
adjustment. The exchange price is adjusted for payments of dividends
in excess of the reference dividend per the Indenture of $0.64 per
share. The adjusted exchange price at December 31, 2007 was
$73.25 per share. Upon an exchange of the notes, the Company will
settle any amounts up to the principal amount of the notes in cash and the
remaining exchange value, if any, will be settled, at the Company’s option, in
cash, common stock or a combination of both. The notes are not
redeemable at the option of the Company for five years, except to preserve the
status of the Company as a REIT. Holders of the notes may require the
Company to repurchase the notes upon the occurrence of certain designated
events. In addition, prior to November 1, 2026, the holders may
require the Company to repurchase the notes on November 1, 2011, 2016 and
2021. The notes will mature on November 1, 2026, unless previously
redeemed, repurchased or exchanged in accordance with their terms prior to that
date.
Noteholders
may also require an exchange of the notes subsequent to December 31, 2006 if the
closing sale price of common stock exceeds 130% of the exchange price for a
certain period of time or if the trading price on the notes be less than 98% of
the product of the closing sales price of common stock multiplied by the
applicable exchange rate for a certain period of time.
The notes
are structurally subordinated to the secured indebtedness of the
Company. The Company is not subject to any financial covenants under
the Indenture. In addition, the Indenture will not restrict the
ability to pay distributions, incur debt or issue or repurchase
securities.
6 LINE
OF CREDIT
As of
December 31, 2007, the Company had an unsecured line of credit of $140,000 with
an outstanding balance of $2,500, which expires September 1, 2008 and can be
extended one year upon satisfaction on certain conditions. The
Company has had no occurrences of default through December 31,
2007. The line of credit is led by Manufacturers and Traders Trust
Company, as Administrative Agent, with three other
participants: Citizens Bank of Rhode Island, Chevy Chase Bank, and
Comerica Bank. Borrowings under the line of credit bear interest
at 0.75% over the
one-month LIBOR. The one-month LIBOR was 4.60% at December 31,
2007.
Increases
in interest rates will raise the Company's interest expense on any outstanding
balances and as a result would affect the Company's results of operations and
financial condition. The credit agreement relating to
this line of credit requires the Company to maintain certain financial ratios
and measurements. The Company was in compliance with these financial
covenants for the years ended December 31, 2007 and 2006.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
7 MINORITY
INTEREST
Minority
interest in the Company relates to the interest in the Operating Partnership and
affordable limited partnership not owned by Home Properties,
Inc. Holders of UPREIT Units may redeem a unit for one share of the
Company's common stock or cash equal to the fair market value at the time of the
redemption, at the option of the Company.
For 2007,
2006 and 2005, the effect of consolidating the affordable limited partnerships
(Note 3) in connection with FIN 46R has been reflected in the change in minority
interest for the year. The changes in minority interest for the years
ended December 31, 2007, 2006 and 2005 are as follows:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Balance,
beginning of year
|
|
$ |
282,542 |
|
|
$ |
323,269 |
|
|
$ |
310,775 |
|
Net
income
|
|
|
23,415 |
|
|
|
43,327 |
|
|
|
37,190 |
|
Accumulated
other comprehensive income (loss)
|
|
|
(35 |
) |
|
|
(2 |
) |
|
|
278 |
|
Issuance
of UPREIT Units associated with property acquisitions
|
|
|
36,290 |
|
|
|
20,397 |
|
|
|
55,598 |
|
Exchange
of UPREIT Units for Common Shares
|
|
|
(10,025 |
) |
|
|
(71,157 |
) |
|
|
(4,010 |
) |
Adjustment
between minority interest and stockholders' equity
|
|
|
(18,589 |
) |
|
|
2,511 |
|
|
|
(33,856 |
) |
Distributions
|
|
|
(34,537 |
) |
|
|
(35,779 |
) |
|
|
(39,279 |
) |
Effect
of consolidating affordable limited partnerships under FIN
46R
|
|
|
- |
|
|
|
(24 |
) |
|
|
(3,427 |
) |
Balance,
end of year
|
|
$ |
279,061 |
|
|
$ |
282,542 |
|
|
$ |
323,269 |
|
8 PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Preferred
Stock
On May
26, 2005, all 250,000 shares of the Series D Preferred Shares were converted
into 833,333 shares of Common stock. The conversion of the Series D
Preferred Shares to Common Shares did not have an effect on the reported results
of operations. As of December 31, 2005, there were no Series D
Preferred Shares outstanding. In June 2000, the Company privately
placed 250,000 of its 8.78% Series D convertible cumulative preferred stock
("Series D Preferred Shares"), $100 liquidation preference per
share. This offering generated net proceeds of approximately
$25,000. The net proceeds were used to fund Company acquisitions and
property upgrades. The Series D Preferred Shares were convertible at
any time by the holder into Common Shares at a conversion price of $30.00 per
Common Share, equivalent to a conversion ratio of 3.333 Common Shares for each
Series D Preferred share (equivalent to 833,333 Common Shares assuming 100%
converted) and were non-callable for five years. Each Series D
Preferred share received the greater of a quarterly distribution of $2.195 per
share or the dividend paid on a share of common stock on an as-converted
basis.
The
Series F Preferred Shares were redeemed by the Company on March 26, 2007 at a
redemption price of $25.00 per share, plus accrued and unpaid dividends of
$390. In accordance with the SEC’s clarification of EITF Abstracts,
Topic No. D-42, The Effect on
the Calculation of Earnings per Share for the Redemption or Induced Conversion
of Preferred Stock, the initial offering costs of $1,902 associated with
the issuance of the Series F Preferred Shares were written-off in the first
quarter of 2007, and are reflected as a reduction of net income available to
common stockholders in determining earnings per share for the year ended
December 31, 2007. In March 2002, the Company issued 2,400,000 shares
of its 9.00% Series F Cumulative Redeemable Preferred Stock ("Series F Preferred
Shares"), with a $25.00 liquidation preference per share. This
offering generated net proceeds of approximately $58,098. Each Series
F Preferred share received an annual dividend equal to 9.00% of the liquidation
preference per share (equivalent to a fixed annual amount of $2.25 per
share).
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
8 PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (Continued)
Common
Stock
In 1997,
the Company's Board of Directors approved a stock repurchase program under which
the Company may repurchase shares of its outstanding common stock and UPREIT
Units (“Company Program”). The shares/units may be repurchased
through open market or privately negotiated transactions at the discretion of
Company management. The Board's action did not establish a target
price or a specific timetable for repurchase. At December 31, 2004
the Company had authorization to repurchase 2,000,000 shares of common stock and
UPREIT Units under the Company Program. On each of February 16, 2005,
November 4, 2005 and October 27, 2006, the Board of Directors approved
2,000,000-share increases in the stock repurchase program. During
2007, 2006 and 2005 the Company repurchased 1,243,700, 2,613,747 and 2,779,805
additional shares at a cost of $58,285, $142,533 and $111,700,
respectively. The Company has authorization to repurchase 1,362,748
shares/units as of December 31, 2007.
Dividend
Reinvestment Plan
The
Company has a Dividend Reinvestment Plan (the "DRIP"). The DRIP
provides the stockholders of the Company an opportunity to automatically invest
their cash dividends in common stock. In addition, eligible
participants may make monthly payments or other voluntary cash investments in
shares of common stock. The maximum monthly investment without prior
Company approval is currently $10. There is no discount offered on
the investment. The Company meets share demand under the DRIP through
share repurchases by the transfer agent in the open market on the Company's
behalf or new share issuance. From January 1, 2006 through December
26, 2006, the Company met demand through share repurchases by the transfer agent
in the open market on the Company's behalf. From December 27, 2006
through September 25, 2007, the Company met demand by issuing new
shares. As of September 26, 2007, the Company switched to meeting
demand through share repurchases by the transfer agent in the open market on the
Company's behalf.
Dividends
Stockholders
are taxed on dividends and must report such dividends as either ordinary income,
capital gains, or as return of capital. The Company has declared a
$2.61 distribution per common share (CUSIP 437306103) during its most recent
fiscal year and a $0.725 distribution per Series F preferred share (CUSIP
437306509) for a portion of its most recent fiscal year when the Series F
Preferred stock was outstanding. Pursuant to Internal Revenue Code
Section 857 (b) (3) (C), for the years ended December 31, 2007, 2006 and 2005,
the Company designates the taxable composition of the following cash
distributions to holders of common and preferred shares in the amounts set forth
in the tables below:
Common
|
|
|
Distribution Type
|
|
Declaration
Dates
|
Record
Dates
|
Payable
Dates
|
|
Distributions
Per
Share
|
|
|
Ordinary
Taxable
Dividend
|
|
|
Qualified
Dividend
|
|
|
Return
of
Capital
|
|
|
Long-Term
Capital
Gain
|
|
|
Unrecaptured
Sec.
1250
Gain
|
|
2/7/2007
|
2/16/2007
|
2/28/2007
|
|
$ |
0.65 |
|
|
|
33.94 |
% |
|
|
0.00 |
% |
|
|
18.14 |
% |
|
|
30.55 |
% |
|
|
17.37 |
% |
5/1/2007
|
5/14/2007
|
5/24/2007
|
|
|
0.65 |
|
|
|
33.94 |
% |
|
|
0.00 |
% |
|
|
18.14 |
% |
|
|
30.55 |
% |
|
|
17.37 |
% |
8/2/2007
|
8/13/2007
|
8/24/2007
|
|
|
0.65 |
|
|
|
33.94 |
% |
|
|
0.00 |
% |
|
|
18.14 |
% |
|
|
30.55 |
% |
|
|
17.37 |
% |
11/5/2007
|
11/16/2007
|
11/27/2007
|
|
|
0.66 |
|
|
|
33.94 |
% |
|
|
0.00 |
% |
|
|
18.14 |
% |
|
|
30.55 |
% |
|
|
17.37 |
% |
|
|
TOTALS
|
|
$ |
2.61 |
|
|
|
33.94 |
% |
|
|
0.00 |
% |
|
|
18.14 |
% |
|
|
30.55 |
% |
|
|
17.37 |
% |
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
8 PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (Continued)
Dividends
(Continued)
The
taxable composition of cash distributions for each common share for 2006 and
2005 is as follows:
|
|
|
Distribution Type
|
|
Year
|
|
Distributions
Per
Share
|
|
|
Ordinary
Taxable
Dividend
|
|
|
Qualified
Dividend
|
|
|
Return
of
Capital
|
|
|
Long-Term
Capital
Gain
|
|
|
Unrecaptured
Sec.
1250
Gain
|
|
2006
|
|
$ |
2.57 |
|
|
|
29.79 |
% |
|
|
0.04 |
% |
|
|
32.86 |
% |
|
|
0.00 |
% |
|
|
37.31 |
% |
2005
|
|
|
2.53 |
|
|
|
42.95 |
% |
|
|
0.00 |
% |
|
|
55.34 |
% |
|
|
0.00 |
% |
|
|
1.71 |
% |
Series F Cumulative
Preferred
|
|
|
Distribution Type
|
|
Declaration
Dates
|
Record
Dates
|
Payable
Dates
|
|
Distributions
Per
Share
|
|
|
Ordinary
Taxable
Dividend
|
|
|
Qualified
Dividend
|
|
|
Return
of
Capital
|
|
|
Long-Term
Capital
Gain
|
|
|
Unrecaptured
Sec.
1250
Gain
|
|
2/7/2007
|
2/16/2007
|
2/28/2007
|
|
$ |
0.5625 |
|
|
|
41.46 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
37.32 |
% |
|
|
21.22 |
% |
Redemption
|
Redemption
|
3/26/2007
|
|
|
0.1625 |
|
|
|
41.46 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
37.32 |
% |
|
|
21.22 |
% |
|
|
TOTALS
|
|
$ |
0.7250 |
|
|
|
41.46 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
37.32 |
% |
|
|
21.22 |
% |
The
taxable composition of cash distributions for each preferred share for 2006 and
2005 is as follows:
|
|
|
Distribution Type
|
|
Year
|
|
Distributions
Per
Share
|
|
|
Ordinary
Taxable
Dividend
|
|
|
Qualified
Dividend
|
|
|
Return
of
Capital
|
|
|
Long-Term
Capital
Gain
|
|
|
Unrecaptured
Sec.
1250
Gain
|
|
2006
|
|
$ |
2.25 |
|
|
|
44.37 |
% |
|
|
0.06 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
55.57 |
% |
2005
|
|
|
2.25 |
|
|
|
96.16 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
3.84 |
% |
Total
Shares/Units Outstanding
At
December 31, 2007, 32,600,614 common shares, and 13,446,929 UPREIT Units were
outstanding for a total of 46,047,543 common share equivalents.
There
were no preferred shares outstanding as of December 31, 2007.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
9 STOCK
BENEFIT PLAN
Description
of Stock Benefit Plan
The
Company’s 1994 Stock Benefit Plan (the "1994 Plan") was adopted by the Company
at the time of its initial public offering. On February 1, 2000, the
Company adopted the 2000 Stock Benefit Plan, which was subsequently amended (the
"2000 Plan"). On May 6, 2003, the Company adopted the 2003 Stock
Benefit Plan and on May 6, 2005, the shareholders approved the Amended and
Restated 2003 Stock Benefit Plan (the “2003 Plan”). No additional
options will be issued under the 1994 Plan and the 2000
Plan. Participants in each of the above referenced plans (the “Stock
Plans”) include officers, non-employee directors, and key employees of the
Company. The Stock Plans allow for the grant of options, stock
appreciation rights and restricted stock awards. No stock
appreciation rights have been granted. The 1994 Plan provided for the
issuance of up to 1,596,000 options to officers and employees and 154,000
options to non-employee directors. The 2000 Plan limits the number of shares
issuable under the plan to 2,755,000, of which 205,000 were to be available for
issuance to the non-employee directors. The 2003 Plan limits
the number of shares issuable under the plan to 2,859,475, of which 249,475 are
to be available for issuance to the non-employee directors. Under the
1994 Plan, 1,542,381 shares have been granted to employees and 153,654 shares
have been granted to non-employee directors. Awards for 2,451,922
shares have been granted to employees and awards for 166,460 shares have been
granted to non-employee directors under the 2000 Plan. Under the 2003
Plan and as of December 31, 2007, 2,833,964 awards for shares have been issued
to employees and 246,658 awards for shares have been issued to non-employee
directors and 162,331 and 2,817 common shares are available for future grant of
awards under the 2003 Plan for officers and employees and non-employee
directors, respectively. Options granted under the Stock Plans vest
20% for each year of service until 100% vested on the fifth anniversary, except
that options issued to certain officers (276,000) and all of the options issued
to non-employee directors under the 1994 Plan and 2000 Plan vested immediately
upon grant. The exercise price per share for stock options issued
under all of the Stock Plans may not be less than 100% of the fair market value
of a share of common stock on the date the stock option is
granted. Options granted to non-employee directors under the 1994
Plan and the 2000 Plan expire after five years from the date of
grant. All other options expire after ten years from the date of
grant. Restricted stock awards granted to directors vest 100% on the
fifth anniversary of the date of grant. All of the 43,756, 53,066 and
49,500 restricted stock awards granted to employees during 2007, 2006 and 2005
vest 25% on each anniversary of the date of grant for a period of four
years. The Company has a policy of issuing new shares upon the
exercise of stock options and upon the lapsing of restrictions with respect to
restricted stock.
On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123R, Share Based
Payments (“SFAS 123R”). The statement is a revision of SFAS
No. 123 Accounting for
Stock-Based Compensation. SFAS 123R supersedes APB Opinion No.
25 Accounting for Stock Issued
to Employees and its related implementation guidance. SFAS
123R requires that entities recognize the cost of employee services received in
exchange for awards of equity instruments (i.e., stock options) based on the
grant-date fair value of those awards. Prior to January 1, 2006, the
Company applied the provisions of SFAS No. 148 Accounting for Stock-Based
Compensation – Transition and Disclosure, an Amendment to SFAS No. 123
(“SFAS 148”). Under SFAS 148, the Company recognized compensation
cost related to stock option grants, based on the fair value on the date of the
grant, over the expected service period of the employee receiving the
award.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
9 STOCK
BENEFIT PLAN (Continued)
Stock
Options
The
Company uses the Black-Scholes formula to estimate the fair value of stock
options granted to employees for both SFAS 123R and SFAS 148. SFAS
123R and SFAS 148 require the estimation of forfeitures when recognizing
compensation expense and that this estimate of forfeitures be adjusted over the
requisite service period should actual forfeitures differ from such
estimates. Changes in estimated forfeitures are recognized through a
cumulative catch-up adjustment, which is recognized in the period of change and
which impacts the amount of unamortized compensation expense to be recognized in
future periods. For options granted prior to January 1, 2006, the
Company used the nominal vesting period approach. For option grants on or after
January 1, 2006, the Company applies the non-substantive vesting period approach
which resulted in $724 of additional compensation costs in the year of adoption
for retirement eligible employees and directors than what would have been
recognized under SFAS 148. As a result of the adoption of SFAS 123R,
the Company began capitalizing stock-based compensation costs as a component of
employee compensation that is capitalized as part of self-constructed fixed
assets which amounted to $87 and $36 for the years ended December 31, 2007 and
2006, respectively. The Company applied the modified prospective
application in adopting SFAS 123R.
A summary
of stock option activity for the year ended December 31, 2007 is as
follows:
|
|
Number of Options
|
|
|
Weighted
Average Exercise Price
Per Option
|
|
|
Weighted
Average Remaining Contractual
Term in Years
|
|
|
Aggregate Intrinsic
Value
|
|
Options
outstanding at December 31, 2006
|
|
|
2,348,014 |
|
|
$ |
40.24 |
|
|
|
|
|
|
|
Granted
|
|
|
543,305 |
|
|
|
55.35 |
|
|
|
|
|
|
|
Exercised
|
|
|
(167,529 |
) |
|
|
37.56 |
|
|
|
|
|
|
|
Cancelled
|
|
|
(72,268 |
) |
|
|
46.71 |
|
|
|
|
|
|
|
Options
outstanding at December 31, 2007
|
|
|
2,651,522 |
|
|
$ |
43.33 |
|
|
|
6.9 |
|
|
$ |
4,030 |
|
Options
exercisable at December 31, 2007
|
|
|
1,198,489 |
|
|
$ |
36.83 |
|
|
|
5.4 |
|
|
$ |
9,612 |
|
The total
cash received from the exercise of options was $6,293, $25,070 and $7,029 during
the years ended December 31, 2007, 2006 and 2005, respectively. The
weighted-average grant-date fair value of options granted during the years 2007,
2006 and 2005 was $6.79, $6.69 and $3.52, respectively. The total
intrinsic value of options exercised was $2,971, $14,419 and $2,367 during the
years ended December 31, 2007, 2006 and 2005, respectively.
A summary
of unvested stock option activity for the year ended December 31, 2007 is as
follows:
|
|
Number of Options
|
|
|
Weighted
Average Exercise Price
Per Option
|
|
Unvested
stock options at December 31, 2006
|
|
|
1,435,494 |
|
|
$ |
43.85 |
|
Granted
|
|
|
543,305 |
|
|
|
55.35 |
|
Vested
|
|
|
(453,498 |
) |
|
|
41.68 |
|
Cancelled
|
|
|
(72,268 |
) |
|
|
46.71 |
|
Unvested
stock options at December 31, 2007
|
|
|
1,453,033 |
|
|
$ |
48.69 |
|
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
9 STOCK
BENEFIT PLAN (Continued)
Stock
Options (Continued)
As of
December 31, 2007, there was $4,303 of total unrecognized compensation cost
related to unvested stock options; that cost is expected to be recognized over a
weighted-average period of 2.09 years. The total fair value of
options vested during the years ended December 31, 2007, 2006 and 2005 was
$1,687, $1,279 and $987, respectively.
The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions for the years ended December 31, 2007, 2006 and 2005 as
follows:
Assumption
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Expected
dividend yields
|
|
|
5.27 |
% |
|
|
5.26 |
% |
|
|
6.55 |
% |
Expected
volatility
|
|
|
19.25 |
% |
|
|
18.73 |
% |
|
|
18.76 |
% |
Expected
lives of the options with a lifetime of ten years
|
|
5.7
Years
|
|
|
6.5
Years
|
|
|
7.5
Years
|
|
Expected
lives of the options with a lifetime of five years
|
|
4.6
Years
|
|
|
5.0
Years
|
|
|
5.0
Years
|
|
Risk
free interest rate
|
|
|
4.59 |
% |
|
|
5.09 |
% |
|
|
4.10 |
% |
The
expected dividend yield was based on the historical dividend growth rates and
the historical annual dividends. The expected volatility was based on
the historical volatility of the Company’s common stock. In 2007 the
weighted average expected option lives, for both options with a lifetime of ten
and five years, was based on the Company’s historical data for prior period
stock option exercise and cancellation activity. In 2006, the
expected lives of the options was determined by applying the “simplified method”
approach (median between the average vesting term and the contractual term) for
plain vanilla option grants made during 2006, as prescribed by Staff Accounting
Bulletin No. 107, Share-Based
Payment (“SAB 107”). Prior to 2006, the median point between
the final vesting date and expiration date was used. The risk-free
interest rates for the expected life of the options were based on the implied
U.S. Treasury yield curve.
In 2007,
2006 and 2005, the Company recognized $1,938, $1,793 and $872, respectively, in
stock compensation costs related to its outstanding stock options.
Restricted
Stock
A summary
of restricted stock activity for the year ended December 31, 2007 is as
follows:
|
|
Number of Shares
|
|
|
Weighted
Average
Grant
Date Fair Value
Per Share
|
|
Restricted
stock outstanding and unvested at December 31, 2006
|
|
|
270,405 |
|
|
$ |
39.94 |
|
Granted
|
|
|
52,216 |
|
|
|
55.70 |
|
Vested
and issued
|
|
|
(104,167 |
) |
|
|
38.65 |
|
Cancelled
|
|
|
(2,555 |
) |
|
|
42.96 |
|
Restricted
stock outstanding and unvested at December 31, 2007
|
|
|
215,899 |
|
|
$ |
44.34 |
|
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
9 STOCK
BENEFIT PLAN (Continued)
Restricted
Stock (Continued)
In 2007,
2006 and 2005, the Company granted a total of 52,216, 62,066 and 57,375 shares
of restricted stock to both employees and directors,
respectively. The directors’ grants included above for 2007, 2006 and
2005 were 8,460, 9,000 and 7,875 shares, respectively. The restricted
stock outstanding at December 31, 2007, 2006 and 2005 was 215,899, 270,405 and
277,822 shares, respectively.
Effective
January 1, 2006, the Company began recognizing expense for the restricted stock
grants based on the expected service period of the grantee. For grant
recipients that have met or exceeded the retirement eligible age (59.5 for
employees and 75 for directors), the expense is recognized upon
grant. For recipients approaching retirement, the expense is
recognized ratably over the lesser of the term between the grant date and the
expected retirement date or the vesting period. All other restricted
stock grants are expensed ratably over the vesting period of 5 and 4 years for
director and employee grants, respectively. Prior to 2006, restricted
stock grants were expensed ratably over the vesting period of 5 and 4 years for
director and employee grants, respectively.
The
restricted shares were granted during 2007, 2006 and 2005 at a weighted average
price of $55.70, $51.00 and $41.47 per share, respectively. The total
fair value of restricted shares vested during 2007, 2006 and 2005 was $6,032,
$3,562 and $1,629, respectively. Total compensation cost recorded for
2007, 2006 and 2005 for the restricted share grants was $2,592, $2,883 and
$1,660, respectively. As of December 31, 2007, there was $4,439 of
total unrecognized compensation cost related to unvested restricted stock; that
cost is expected to be recognized over a weighted-average period of 2.67
years.
10 SEGMENT
REPORTING
The
Company is engaged in the ownership and management of market rate apartment
communities. Each apartment community is considered a separate
operating segment. Each segment on a stand alone basis is less than
10% of the revenues, profit or loss, and assets of the combined reported
operating segments and meets all of the aggregation criteria under SFAS
131. The operating segments are aggregated as Core and Non-core
properties.
Non-segment
revenue to reconcile to total revenue consists of interest and dividend income
and other income. Non–segment assets to reconcile to total assets
include cash and cash equivalents, cash in escrows, accounts receivable, prepaid
expenses, deferred charges, and other assets.
Core
properties consist of all apartment communities owned throughout 2006 and 2007
where comparable operating results are available. Therefore, the Core
Properties represent communities owned as of January 1,
2006. Non-core properties consist of apartment communities acquired
during 2006 and 2007, such that full year comparable operating results are not
available. In addition, the core properties segment does not include
assets held for sale as of December 31, 2005.
The
Company assesses and measures segment operating results based on a performance
measure referred to as net operating income. Net operating income is
defined as total revenues less operating and maintenance expenses. The
accounting policies of the segments are the same as those described in Notes 1
and 2.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
10 SEGMENT
REPORTING (Continued)
The
revenues and net operating income for each of the reportable segments are
summarized as follows for the years ended December 31, 2007, 2006 and
2005.
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Apartments
owned
|
|
|
|
|
|
|
|
|
|
Core
properties
|
|
$ |
438,718 |
|
|
$ |
421,669 |
|
|
$ |
384,758 |
|
Non-core
properties
|
|
|
63,383 |
|
|
|
13,327 |
|
|
|
- |
|
Reconciling
items
|
|
|
3,087 |
|
|
|
5,229 |
|
|
|
2,604 |
|
Total
revenues
|
|
$ |
505,188 |
|
|
$ |
440,225 |
|
|
$ |
387,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments
owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
properties
|
|
$ |
254,980 |
|
|
$ |
242,900 |
|
|
$ |
215,743 |
|
Non-core
properties
|
|
|
35,995 |
|
|
|
7,236 |
|
|
|
- |
|
Reconciling
items
|
|
|
3,087 |
|
|
|
5,229 |
|
|
|
2,604 |
|
Net
operating income
|
|
|
294,062 |
|
|
|
255,365 |
|
|
|
218,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
& administrative expenses
|
|
|
(23,413 |
) |
|
|
(22,626 |
) |
|
|
(19,652 |
) |
Interest
expense
|
|
|
(119,383 |
) |
|
|
(104,735 |
) |
|
|
(90,079 |
) |
Depreciation
and amortization
|
|
|
(110,329 |
) |
|
|
(92,902 |
) |
|
|
(78,125 |
) |
Impairment
of assets held as general partner
|
|
|
- |
|
|
|
- |
|
|
|
(400 |
) |
Minority
interest in operating partnership
|
|
|
(10,824 |
) |
|
|
(8,847 |
) |
|
|
(7,852 |
) |
Income
from continuing operations
|
|
$ |
30,113 |
|
|
$ |
26,255 |
|
|
$ |
22,239 |
|
The
assets for each of the reportable segments are summarized as follows as of
December 31, 2007 and 2006:
Assets
|
|
2007
|
|
|
2006
|
|
Apartments
owned
|
|
|
|
|
|
|
Core
properties
|
|
$ |
2,490,561 |
|
|
$ |
2,495,622 |
|
Non-core
properties
|
|
|
645,677 |
|
|
|
506,011 |
|
Reconciling
items
|
|
|
80,185 |
|
|
|
238,785 |
|
Total
assets
|
|
$ |
3,216,423 |
|
|
$ |
3,240,418 |
|
11 DERIVATIVE
FINANCIAL INSTRUMENTS
At
December 31, 2007, the Company had no outstanding interest rate swap agreements;
however, during 2007 the Company had four interest rate swaps that effectively
converted variable rate debt to fixed rate debt. The notional amount amortized
in conjunction with the principal payments of the hedged items. The
terms were as follows:
Original
Notional Amount
|
|
|
Fixed Interest Rate
|
|
Variable Interest Rate
|
Scheduled
Maturity Date
|
$ |
16,384,396 |
|
|
|
5.35 |
% |
LIBOR
+ 1.50%
|
June
25, 2007
|
|
10,000,000 |
|
|
|
5.39 |
% |
LIBOR
+ 1.50%
|
June
25, 2007
|
|
3,000,000 |
|
|
|
8.22 |
% |
LIBOR
+ 1.40%
|
June
25, 2007
|
|
4,625,000 |
|
|
|
8.40 |
% |
LIBOR
+ 1.40%
|
June
25, 2007
|
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
11 DERIVATIVE
FINANCIAL INSTRUMENTS (Continued)
On
May 29, 2007, these interest rate swaps were terminated and the Company
received a termination fee of $27. The accumulated other
comprehensive income of $84 was reclassified into earnings. The
related variable rate debt was repaid on June 13, 2007. For the
entire term of these interest rate swap agreements, as the critical terms of the
interest rate swaps and the hedged items were the same, no ineffectiveness was
recorded in the consolidated statements of operations. All components
of the interest rate swaps were included in the assessment of hedge
effectiveness.
The
Company has entered into interest rate swaps to minimize significant unplanned
fluctuations in earnings that are caused by interest rate
volatility. The Company does not utilize these arrangements for
trading or speculative purposes. The principal risk to the Company
through its interest rate hedging strategy is the potential inability of the
financial institutions from which the interest rate protection was purchased to
cover all of their obligations. To mitigate this exposure, the
Company purchases its interest rate swaps from either the institution that holds
the debt or from institutions with a minimum A- credit rating.
All
derivatives, which have historically been limited to interest rates swaps
designated as cash flow hedges, are recognized on the balance sheet at their
fair value in accordance with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”). On the date that
the Company enters into an interest rate swap, it designates the derivative as a
hedge of the variability of cash flows that are to be received or paid in
connection with a recognized liability. To the extent effective,
subsequent changes in the fair value of a derivative designated as a cash flow
hedge are recorded in other comprehensive income, until earnings are affected by
the variability of cash flows of the hedged transaction. Any hedge
ineffectiveness will be reported in interest expense in the consolidated
statement of operations. The fair value of the interest rate swaps is based upon
the estimate of amounts the Company would receive or pay to terminate the
contract at the reporting date and is estimated using interest rate market
pricing models.
The
Company formally documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. The Company formally assesses (both at
the hedge's inception and on an ongoing basis) whether the derivatives that are
used in hedging transactions have been highly effective in offsetting changes in
the cash flows of the hedged items and whether those derivatives may be expected
to remain highly effective in future periods. Should it be determined
that a derivative is not (or has ceased to be) highly effective as a hedge, the
Company will discontinue hedge accounting prospectively.
12 TRANSACTIONS
WITH AFFILIATES
The
Company and the HPRS recognized management and development fee revenue, interest
income and other miscellaneous income from affiliated entities of $24, $59 and
$230 for the years ended December 31, 2007, 2006 and 2005,
respectively.
On
January 1, 2004, the Company sold certain assets of its commercial property
management division to Home Leasing, LLC, which was owned by Nelson and
Norman Leenhouts and is now owned by Nelson Leenhouts. This
division managed approximately 2.2 million square feet of gross leasable area,
as well as certain planned communities. Subsequently, some of the
assets were sold to Broadstone Real Estate LLC (“Broadstone”), which is owned in
part by Norman Leenhouts, Amy L. Tait and Mrs. Tait's spouse. The
initial amount received was $82. In addition to the initial amount,
the Company was entitled to receive a percentage of the management fee received
by Broadstone in connection with the management of one of the commercial
properties for a period not to exceed 36 months. The expected monthly
fee as outlined in the contract was approximately $4.6 or $55 per year and was
adjusted to $3.4, or $40 per year after the first year. Broadstone
continued to manage the property for three years, and accordingly, the Company
received a total additional deferred purchase price of $139, of which $44 has
been received for the year ended December 31, 2006. The cumulative
gain recognized on the sale of these assets through December 31, 2006 amounted
to $108.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
12 TRANSACTIONS
WITH AFFILIATES (Continued)
The
Company leases its corporate office space from an affiliate. The
lease requires an annual base rent of $895 for the years ended 2006 through
2009. The lease also requires the Company to pay a pro rata portion
of property improvements, real estate taxes and common area
maintenance. Rental expense was $1,711, $1,699 and $1,693 for the
years ended December 31, 2007, 2006 and 2005 respectively.
13 COMMITMENTS
AND CONTINGENCIES
Property
Lease
On
December 1, 2004, the Company entered in to a lease agreement with a third party
owner to manage the operations of one of their communities with 1,387 apartment
units. The lease had a term of five years, but after two years (from
the 24th month
to the 36th month),
the owner could require the Company to buy the property. From the
36th
month to the end of the lease term, the Company had the right to require the
owner to sell the property to the Company. The agreement required an
initial deposit of $5,000, a deposit in 2005 of $1,230, with an additional
$2,081 deposit requirement during 2006, representing capital improvements paid
by the owner. The net operating income of the property (as defined in
the lease agreement) was remitted back to the owner as rent on a monthly
basis. In exchange for services, the Company was entitled to receive
monthly; a management fee equal to 5% of collected income, as defined in the
lease, an incentive fee of $25, and interest payments equal to 3% annual
interest on the outstanding deposit. On December 27, 2006, the
Company closed on the acquisition of the property. The acquisition
price of the property was $144,768. Including interest, the total
income recognized by the Company amounted to $1,451 and $1,278, for the years
ended December 31, 2006 and 2005, respectively.
Ground
Lease
The
Company had a non-cancelable operating ground lease for one of its
properties. Effective December 2006, the ground lease was sold to an
unrelated party. The lease had an expiration date of May 1,
2020, with options to extend the term of the lease for two successive terms of
twenty-five years each. The lease provided for contingent rental
payments based on certain variable factors. The lease also required
the Company to pay real estate taxes, insurance and certain other operating
expenses applicable to the leased property. Ground lease expense was
$194 and $210, including contingent rents of $130 and $140, for the years ended
December 31, 2006 and 2005, respectively.
401(k)
Savings Plan
The
Company sponsors a contributory savings plan. Under the plan, the
Company will match 75% of the first 4% of participant
contributions. The matching expense under this plan was $794, $832
and $802 for the years ended December 31, 2007, 2006 and 2005,
respectively.
Incentive
Compensation Plan
The
Incentive Compensation Plan provides that eligible officers and key employees
may earn a cash bonus based upon two performance measures: the
percentage of growth in the Company's funds from operations ("FFO") on a per
share/unit diluted basis from the previous year and the percentage of growth in
same store net operating income from the previous year as compared to industry
peers. The bonus expense charged to operations was $4,341, $4,983 and
$2,582 for the years ended December 31, 2007, 2006 and 2005,
respectively.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
13 COMMITMENTS
AND CONTINGENCIES (Continued)
Contingencies
In
connection with various UPREIT transactions, the Company has agreed to maintain
certain levels of nonrecourse debt for a period of 5 to 10 years associated with
the contributed properties acquired. In addition, the Company is
restricted in its ability to sell certain contributed properties (53% of the
owned portfolio) for a period of 7 to 15 years except through a tax deferred
Internal Revenue Code Section 1031 like-kind exchange. The remaining
terms on the sale restrictions range from 1 to 8 years.
Debt
Covenants
The line
of credit loan agreement contains restrictions which, among other things,
require maintenance of certain financial ratios (Note 6).
In
connection with the issuance of the Series F Preferred Stock, the Company was
required to maintain for each fiscal quarterly period a fixed charge coverage
ratio, as defined in the Series F Cumulative Redeemable Preferred Stock Article
Supplementary, of 1.75 to 1.0. The Company was in compliance with the
fixed charge coverage ratio for each quarterly period. The Series F
Preferred Shares were redeemed by the Company on March 26, 2007.
Guarantees
As of
December 31, 2007, the Company, through its general partnership interest in an
affordable property limited partnership, has guaranteed certain low income
housing tax credits to limited partners totaling approximately
$3,000. As of December 31, 2007, there were no known conditions that
would make such payments necessary relating to these guarantees. In
addition, the Company, acting as general partner in this partnership, is
obligated to advance funds to meet partnership operating deficits.
Executive
Retention Plan
Effective
February 2, 1999, the Executive Retention Plan provides for severance benefits
and other compensation to be received by certain employees in the event of a
change in control of the Company and a subsequent termination of their
employment without cause or voluntarily with good cause.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
14 PROPERTY
ACQUISITIONS AND DEVELOPMENT
For the
years ended December 31, 2007, 2006 and 2005, the Company has acquired the
communities listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of
|
|
|
Market
|
Date
|
|
Year
|
|
|
Number
|
|
|
Cost
of
|
|
|
Acquisition
|
|
Apartment Community
|
Area
|
Acquired
|
|
Constructed
|
|
|
of Units
|
|
|
Acquisition
|
|
|
Per Unit
|
|
Ridgeview
at Wakefield Valley
|
Baltimore
|
1/13/05
|
|
1988
|
|
|
|
204 |
|
|
$ |
19,407 |
|
|
$ |
96 |
|
Hackensack
Gardens
|
New
Jersey
|
3/1/05
|
|
1948
|
|
|
|
198 |
|
|
|
13,292 |
|
|
|
65 |
|
Barrington
Gardens
|
New
Jersey
|
3/1/05
|
|
1973
|
|
|
|
148 |
|
|
|
7,444 |
|
|
|
50 |
|
Sayville
Commons
|
Long
Island
|
7/15/05
|
|
|
2001-2003 |
|
|
|
342 |
|
|
|
63,384 |
|
|
|
186 |
|
The
Brooke at Peachtree
|
Philadelphia
|
8/15/05
|
|
|
1986-1989 |
|
|
|
146 |
|
|
|
16,137 |
|
|
|
110 |
|
Peppertree
Farm
|
Northern
VA
|
12/28/05
|
|
|
1972-1978 |
|
|
|
881 |
|
|
|
96,322 |
|
|
|
110 |
|
Cinnamon
Run
|
Northern
VA
|
12/28/05
|
|
|
1979-1982 |
|
|
|
511 |
|
|
|
67,377 |
|
|
|
133 |
|
Highland
House
|
Boston
|
5/31/06
|
|
|
1965-1969 |
|
|
|
172 |
|
|
|
17,889 |
|
|
|
104 |
|
Liberty
Place
|
Boston
|
6/6/06
|
|
1988
|
|
|
|
107 |
|
|
|
14,892 |
|
|
|
139 |
|
The
Heights at Marlborough
|
Boston
|
9/7/06
|
|
1973
|
|
|
|
348 |
|
|
|
48,914 |
|
|
|
141 |
|
The
Meadows at Marlborough
|
Boston
|
9/7/06
|
|
|
1969-1972 |
|
|
|
264 |
|
|
|
34,162 |
|
|
|
129 |
|
Heritage
Woods
|
Baltimore
|
10/4/06
|
|
|
1972-1973 |
|
|
|
164 |
|
|
|
14,042 |
|
|
|
86 |
|
Top
Field
|
Baltimore
|
10/4/06
|
|
1973
|
|
|
|
156 |
|
|
|
18,391 |
|
|
|
118 |
|
The
Coves at Chesapeake
|
Baltimore
|
11/20/06
|
|
1976
& 1982
|
|
|
|
469 |
|
|
|
67,043 |
|
|
|
143 |
|
Mount
Vernon Square (1)
|
Northern
VA
|
12/27/06
|
|
|
1968-1974 |
|
|
|
1,387 |
|
|
|
144,768 |
|
|
|
104 |
|
The
Townhomes of Beverly
|
Boston
|
2/15/07
|
|
1974
|
|
|
|
204 |
|
|
|
36,434 |
|
|
|
179 |
|
Jacob
Ford Village
|
New
Jersey
|
2/15/07
|
|
1948
|
|
|
|
270 |
|
|
|
26,680 |
|
|
|
99 |
|
Fox
Hall Apartments (1)
|
Baltimore
|
3/28/07
|
|
|
1976-1982 |
|
|
|
720 |
|
|
|
62,234 |
|
|
|
86 |
|
Westwoods
|
Boston
|
4/30/07
|
|
1988
|
|
|
|
35 |
|
|
|
3,995 |
|
|
|
114 |
|
Dunfield
Townhomes (1)
|
Baltimore
|
11/1/07
|
|
1986
|
|
|
|
312 |
|
|
|
32,155 |
|
|
|
103 |
|
(1)
Properties fee-managed by the Company prior to acquisition.
During
2006, the Company completed construction and placed into service a 120 unit
apartment community located in Portland, ME (Liberty Commons) at a total cost of
$14,598.
During
2006, the Company completed construction and placed into service 84 units of the
expected 216 unit apartment community located in Allentown, PA (Trexler Park
West). During 2007, the Company completed construction and placed
into service an additional 84 units. The total cost through December
2007 for these 168 units placed in service was $21,062. The remaining
48 units are expected to be completed and placed in service in the third quarter
of 2008.
During
2007, the Company started construction on a project in Silver Spring, Maryland,
a 14-story high rise with 247 apartment units and 10,600 square feet of retail
space that is expected to be completed in the fourth quarter of 2009 at a total
cost of $74,000. The costs associated with construction in progress
for this development were $17,468 as of December 31, 2007.
During
2007, the Company entered the pre-construction phase for a project located in
Fairfax County, Virginia, consisting of four, four-story buildings with 421
units. Construction is expected to begin in 2008 with completion in
2011 at a total cost of $123,000. The costs associated with
construction in progress for this development were $36,263 as of December 31,
2007.
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
15 DISCONTINUED
OPERATIONS
The
Company reports its property dispositions as discontinued operations as
prescribed by the provisions of SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (“SFAS 144”). Pursuant to the
definition of a component of an entity in SFAS 144, assuming no significant
continuing involvement by the former owner after the sale, the sale of an
apartment community is considered a discontinued operation. In
addition, apartment communities classified as held for sale are also considered
a discontinued operation. The Company generally considers assets to
be held for sale when all significant contingencies surrounding the closing have
been resolved, which often corresponds with the actual closing
date.
Included
in discontinued operations for the three years ended December 31, 2007 are the
operating results, net of minority interest, of 48 apartment community
dispositions (5 sold in 2007, 39 sold in 2006 and 4 sold in 2005). In
addition, discontinued operations for the year ended December 31, 2005 includes
the operating results of four VIEs sold during 2005. For purposes of
the discontinued operations presentation, the Company only includes interest
expense associated with specific mortgage indebtedness of the properties that
are considered discontinued operations.
A summary
of community dispositions is as follows:
Year
|
|
Number
of Disposed Communities
|
|
|
Number
of Disposed Units
|
|
|
Number
of Transactions
|
|
|
Total
Sales Price
|
|
|
Sales
Price Per Unit
|
|
|
Total
Gain On Sale (before minority interest)
|
|
2007
|
|
|
5 |
|
|
|
1,084 |
|
|
|
5 |
|
|
$ |
129,500 |
|
|
$ |
119 |
|
|
$ |
42,126 |
|
2006
|
|
|
39 |
|
|
|
9,705 |
|
|
|
3 |
|
|
|
495,300 |
|
|
|
51 |
|
|
|
110,514 |
|
2005
|
|
|
4 |
|
|
|
816 |
|
|
|
3 |
|
|
|
142,600 |
|
|
|
175 |
|
|
|
73,022 |
|
The
operating results of discontinued operations are summarized as follows for the
years ended December 31, 2007, 2006 and 2005:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$ |
9,142 |
|
|
$ |
69,011 |
|
|
$ |
104,552 |
|
Property other
income
|
|
|
621 |
|
|
|
7,396 |
|
|
|
8,049 |
|
Total
revenues
|
|
|
9,763 |
|
|
|
76,407 |
|
|
|
112,601 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance
|
|
|
3,907 |
|
|
|
40,302 |
|
|
|
60,046 |
|
Interest expense
|
|
|
1,704 |
|
|
|
19,116 |
|
|
|
15,314 |
|
Depreciation and
amortization
|
|
|
2,256 |
|
|
|
8,793 |
|
|
|
21,990 |
|
Impairment of real
property
|
|
|
- |
|
|
|
- |
|
|
|
7,325 |
|
Total
expenses
|
|
|
7,867 |
|
|
|
68,211 |
|
|
|
104,675 |
|
Income
from discontinued operations before minority interest and gain on
disposition of property
|
|
|
1,896 |
|
|
|
8,196 |
|
|
|
7,926 |
|
Minority
interest in limited partnership
|
|
|
- |
|
|
|
- |
|
|
|
(23 |
) |
Minority
interest in operating partnership
|
|
|
(542 |
) |
|
|
(2,714 |
) |
|
|
(2,605 |
) |
Income
from discontinued operations
|
|
$ |
1,354 |
|
|
$ |
5,482 |
|
|
$ |
5,298 |
|
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
15 DISCONTINUED
OPERATIONS (Continued)
The
results of discontinued operations in the tables below have been presented for
the year ended December 31, 2005 only, as the discontinued operations for 2007
and 2006 solely represent the results from owned communities.
|
|
Year
ended December 31, 2005
|
|
|
|
Owned
|
|
|
|
|
|
|
|
|
|
Communities
|
|
|
VIEs
|
|
|
Total
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$ |
101,338 |
|
|
$ |
3,214 |
|
|
$ |
104,552 |
|
Property other
income
|
|
|
7,908 |
|
|
|
141 |
|
|
|
8,049 |
|
Total
revenues
|
|
|
109,246 |
|
|
|
3,355 |
|
|
|
112,601 |
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance
|
|
|
57,425 |
|
|
|
2,621 |
|
|
|
60,046 |
|
Interest expense
|
|
|
15,303 |
|
|
|
11 |
|
|
|
15,314 |
|
Depreciation and
amortization
|
|
|
21,990 |
|
|
|
- |
|
|
|
21,990 |
|
Impairment of real
property
|
|
|
- |
|
|
|
7,325 |
|
|
|
7,325 |
|
Total
expenses
|
|
|
94,718 |
|
|
|
9,957 |
|
|
|
104,675 |
|
Income
(loss) from discontinued operations before minority interest and gain on
disposition of property
|
|
|
14,528 |
|
|
|
(6,602 |
) |
|
|
7,926 |
|
Minority
interest in limited partnership
|
|
|
- |
|
|
|
(23 |
) |
|
|
(23 |
) |
Minority
interest in operating partnership
|
|
|
(4,798 |
) |
|
|
2,193 |
|
|
|
(2,605 |
) |
Income
(loss) from discontinued operations
|
|
$ |
9,730 |
|
|
$ |
(4,432 |
) |
|
$ |
5,298 |
|
16 SUPPLEMENTAL
CASH FLOW DISCLOSURES
Supplemental
cash flow information including non cash financing and investing activities for
the years ended December 31, 2007, 2006 and 2005 are as follows:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
117,648 |
|
|
$ |
119,694 |
|
|
$ |
103,578 |
|
Interest
capitalized
|
|
|
3,441 |
|
|
|
1,087 |
|
|
|
1,096 |
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
loans assumed associated with property acquisitions
|
|
|
16,878 |
|
|
|
159,782 |
|
|
|
7,916 |
|
Issuance
of UPREIT Units associated with property and other
acquisitions
|
|
|
36,290 |
|
|
|
20,397 |
|
|
|
55,598 |
|
Increase
in real estate associated with the purchase of UPREIT
Units
|
|
|
16,475 |
|
|
|
124,631 |
|
|
|
5,220 |
|
Exchange
of UPREIT Units for common shares
|
|
|
10,025 |
|
|
|
71,157 |
|
|
|
4,010 |
|
Additions
to properties included in accounts payable
|
|
|
3,684 |
|
|
|
- |
|
|
|
- |
|
Fair
value of hedge instruments
|
|
|
(206 |
) |
|
|
(35 |
) |
|
|
845 |
|
Net
real estate disposed in connection with FIN 46R
consolidation
|
|
|
- |
|
|
|
- |
|
|
|
(50,467 |
) |
Other
assets disposed in connection with FIN 46R consolidation
|
|
|
- |
|
|
|
- |
|
|
|
(6,940 |
) |
Mortgage
debt disposed in connection with FIN 46R consolidation
|
|
|
- |
|
|
|
- |
|
|
|
(59,339 |
) |
Other
liabilities disposed in connection with FIN 46R
consolidation
|
|
|
- |
|
|
|
- |
|
|
|
(1,187 |
) |
HOME
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in thousands, except share and per share data)
17 QUARTERLY
FINANCIAL STATEMENT INFORMATION (UNAUDITED)
Quarterly
financial information for the years ended December 31, 2007 and 2006 are as
follows:
|
|
2007
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Total
revenue
|
|
$ |
125,075 |
|
|
$ |
126,429 |
|
|
$ |
125,719 |
|
|
$ |
127,965 |
|
Net
income available to common shareholders
|
|
|
5,078 |
|
|
|
8,702 |
|
|
|
28,615 |
|
|
|
15,957 |
|
Basic
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
|
0.15 |
|
|
|
0.26 |
|
|
|
0.86 |
|
|
|
0.49 |
|
Diluted
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
|
0.15 |
|
|
|
0.26 |
|
|
|
0.84 |
|
|
|
0.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Total
revenue
|
|
$ |
105,392 |
|
|
$ |
107,732 |
|
|
$ |
111,821 |
|
|
$ |
115,280 |
|
Net
income available to common shareholders
|
|
|
4,138 |
|
|
|
11,003 |
|
|
|
10,361 |
|
|
|
79,583 |
|
Basic
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
|
0.13 |
|
|
|
0.33 |
|
|
|
0.31 |
|
|
|
2.39 |
|
Diluted
earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
|
0.13 |
|
|
|
0.33 |
|
|
|
0.30 |
|
|
|
2.33 |
|
The
sum of the quarterly earnings per common share amounts may not equal the
annual earnings per common share amounts due primarily to changes in the
number of common shares outstanding quarter to quarter. The
quarterly reports for the years ended December 31, 2007 and 2006 have been
reclassified to reflect discontinued operations in accordance with SFAS
144.
|
18 SUBSEQUENT
EVENTS
On
January 31, 2008, the Company sold Carriage Hill Apartments, with a total of 140
units, located in Hudson Valley, New York for $15,085. A gain on sale
of approximately $8,800 (before the allocation of minority interest) will be
recorded in the first quarter 2008 related to this sale.
On
February 1, 2008, the Company sold five apartment communities, with a total of
363 units, located in Long Island, New York for $42,017. A gain on
sale of approximately $16,600 (before the allocation of minority interest) will
be recorded in the first quarter 2008 related to this sale.
On
February 11, 2008, the Board of Directors declared a dividend of $0.66 per share
for the quarter ended December 31, 2007. This is the equivalent
of an annual distribution of $2.64 per share. The dividend is payable
February 29, 2008 to shareholders of record on February 22, 2008.
On
February 21, 2008, the Company sold Mill Company Gardens, with a total of 95
units, located in Portland, Maine for $7,386. A gain on sale of
approximately $3,700 (before the allocation of minority interest) will be
recorded in the first quarter 2008 related to this sale.
HOME
PROPERTIES, INC.
VALUATION
AND QUALIFYING ACCOUNTS
FOR THE
YEARS ENDED DECEMBER 31:
(Dollars
in thousands)
|
|
Balance
at
|
|
|
Charged
to
|
|
|
Adjustments/
|
|
|
|
|
|
|
Beginning
|
|
|
Costs
and
|
|
|
Amounts
|
|
|
Balance
at
|
|
|
|
of Year
|
|
|
Expenses
|
|
|
Written Off
|
|
|
End of Year
|
|
Allowance for Doubtful
Receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
2007:
|
|
$ |
984 |
|
|
$ |
4,063 |
|
|
$ |
(3,348 |
) |
|
$ |
1,699 |
|
2006:
|
|
|
513 |
|
|
|
4,289 |
|
|
|
(3,818 |
) |
|
|
984 |
|
2005:
|
|
|
567 |
|
|
|
3,472 |
|
|
|
(3,526 |
) |
|
|
513 |
|
Deferred Tax Asset Valuation
Allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007:
|
|
|
10,078 |
|
|
|
- |
|
|
|
71 |
|
|
|
10,149 |
|
2006:
|
|
|
8,421 |
|
|
|
- |
|
|
|
1,657 |
|
|
|
10,078 |
|
2005:
|
|
|
8,680 |
|
|
|
- |
|
|
|
(259 |
) |
|
|
8,421 |
|
SCHEDULE III
HOME
PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER
31, 2007
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
Initial
Cost |
|
|
|
|
|
|
|
|
|
Total
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Op |
|
Buildings |
|
|
|
|
Costs |
|
|
|
|
Buildings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit |
|
Improve- |
|
|
OP |
|
Capitalized |
|
|
|
|
Improve- |
|
|
|
|
|
|
Total
Cost |
|
|
|
|
|
|
|
|
|
|
Alloc. |
|
ments |
|
|
Unit |
|
Subsequent |
|
|
|
|
ments |
|
|
|
|
|
|
Net
of |
|
|
|
Encum- |
|
|
|
|
|
|
Land |
|
& |
|
|
Alloc. |
|
to |
|
|
|
|
& |
|
Total |
|
Accumulated
|
|
Accumulated |
|
Year
of
|
|
brances |
|
|
Land |
|
|
|
(a) |
|
Equipment |
|
Bldg.(a) |
|
Acquisition |
|
|
Land |
|
Equipment |
|
(b) |
|
Depreciation |
|
Depreciation |
|
Acquisition |
Barrington
Gardens
|
|
|
3,990 |
|
|
|
888 |
|
|
|
26 |
|
|
|
6,556 |
|
|
|
229 |
|
|
|
3,084 |
|
|
|
914 |
|
|
|
9,869 |
|
|
|
10,783 |
|
|
|
845 |
|
|
|
9,938 |
|
|
2005
|
Bayview
& Colonial
|
|
|
11,295 |
|
|
|
1,600 |
|
|
|
63 |
|
|
|
8,471 |
|
|
|
645 |
|
|
|
4,340 |
|
|
|
1,663 |
|
|
|
13,456 |
|
|
|
15,119 |
|
|
|
2,932 |
|
|
|
12,187 |
|
|
2000
|
Beechwood
Gardens
|
|
|
- |
|
|
|
560 |
|
|
|
37 |
|
|
|
3,442 |
|
|
|
386 |
|
|
|
4,359 |
|
|
|
597 |
|
|
|
8,187 |
|
|
|
8,784 |
|
|
|
2,032 |
|
|
|
6,752 |
|
|
1998
|
Blackhawk
Apartments
|
|
|
13,014 |
|
|
|
2,968 |
|
|
|
69 |
|
|
|
14,568 |
|
|
|
742 |
|
|
|
5,513 |
|
|
|
3,037 |
|
|
|
20,823 |
|
|
|
23,860 |
|
|
|
4,727 |
|
|
|
19,133 |
|
|
2000
|
Bonnie
Ridge Apartments
|
|
|
58,752 |
|
|
|
4,830 |
|
|
|
353 |
|
|
|
42,769 |
|
|
|
3,675 |
|
|
|
29,291 |
|
|
|
5,183 |
|
|
|
75,735 |
|
|
|
80,918 |
|
|
|
18,559 |
|
|
|
62,359 |
|
|
1999
|
Braddock
Lee Apartments
|
|
|
20,851 |
|
|
|
3,810 |
|
|
|
132 |
|
|
|
8,842 |
|
|
|
1,325 |
|
|
|
5,932 |
|
|
|
3,942 |
|
|
|
16,099 |
|
|
|
20,041 |
|
|
|
5,021 |
|
|
|
15,020 |
|
|
1998
|
Cambridge
Village Associates
|
|
|
- |
|
|
|
2,460 |
|
|
|
48 |
|
|
|
3,188 |
|
|
|
467 |
|
|
|
2,106 |
|
|
|
2,508 |
|
|
|
5,761 |
|
|
|
8,269 |
|
|
|
996 |
|
|
|
7,273 |
|
|
2002
|
Canterbury
Apartments
|
|
|
28,525 |
|
|
|
4,944 |
|
|
|
203 |
|
|
|
21,384 |
|
|
|
2,090 |
|
|
|
8,634 |
|
|
|
5,147 |
|
|
|
32,108 |
|
|
|
37,255 |
|
|
|
7,081 |
|
|
|
30,174 |
|
|
1999
|
Carriage
Hill Apartment
|
|
|
5,603 |
|
|
|
570 |
|
|
|
53 |
|
|
|
3,827 |
|
|
|
555 |
|
|
|
3,747 |
|
|
|
623 |
|
|
|
8,129 |
|
|
|
8,752 |
|
|
|
2,836 |
|
|
|
5,916 |
|
|
1996
|
Castle
Club Apartments
|
|
|
6,533 |
|
|
|
948 |
|
|
|
49 |
|
|
|
8,909 |
|
|
|
504 |
|
|
|
3,821 |
|
|
|
997 |
|
|
|
13,234 |
|
|
|
14,231 |
|
|
|
2,817 |
|
|
|
11,414 |
|
|
2000
|
Chatham
Hill Apartments
|
|
|
45,000 |
|
|
|
1,848 |
|
|
|
252 |
|
|
|
46,150 |
|
|
|
2,163 |
|
|
|
6,937 |
|
|
|
2,100 |
|
|
|
55,250 |
|
|
|
57,350 |
|
|
|
5,698 |
|
|
|
51,652 |
|
|
2004
|
Chesterfield
Apartments
|
|
|
10,313 |
|
|
|
1,482 |
|
|
|
76 |
|
|
|
8,206 |
|
|
|
771 |
|
|
|
5,508 |
|
|
|
1,558 |
|
|
|
14,485 |
|
|
|
16,043 |
|
|
|
4,439 |
|
|
|
11,604 |
|
|
1997
|
Cider
Mill
|
|
|
68,379 |
|
|
|
15,552 |
|
|
|
414 |
|
|
|
65,938 |
|
|
|
4,146 |
|
|
|
8,551 |
|
|
|
15,966 |
|
|
|
78,635 |
|
|
|
94,601 |
|
|
|
11,261 |
|
|
|
83,340 |
|
|
2002
|
Cinnamon
Run Apartments
|
|
|
57,709 |
|
|
|
7,731 |
|
|
|
193 |
|
|
|
59,646 |
|
|
|
1,635 |
|
|
|
2,243 |
|
|
|
7,924 |
|
|
|
63,524 |
|
|
|
71,448 |
|
|
|
3,501 |
|
|
|
67,947 |
|
|
2005
|
Country
Village Apartments
|
|
|
19,608 |
|
|
|
2,236 |
|
|
|
97 |
|
|
|
11,149 |
|
|
|
989 |
|
|
|
9,173 |
|
|
|
2,333 |
|
|
|
21,311 |
|
|
|
23,644 |
|
|
|
5,883 |
|
|
|
17,761 |
|
|
1998
|
Courtyards
Village
|
|
|
- |
|
|
|
3,360 |
|
|
|
44 |
|
|
|
9,824 |
|
|
|
455 |
|
|
|
3,206 |
|
|
|
3,404 |
|
|
|
13,485 |
|
|
|
16,889 |
|
|
|
2,563 |
|
|
|
14,326 |
|
|
2001
|
Coventry
Village Apartments
|
|
|
- |
|
|
|
784 |
|
|
|
40 |
|
|
|
2,328 |
|
|
|
412 |
|
|
|
3,026 |
|
|
|
824 |
|
|
|
5,766 |
|
|
|
6,590 |
|
|
|
1,739 |
|
|
|
4,851 |
|
|
1998
|
Curren
Terrace
|
|
|
24,538 |
|
|
|
1,908 |
|
|
|
94 |
|
|
|
10,957 |
|
|
|
961 |
|
|
|
6,897 |
|
|
|
2,002 |
|
|
|
18,815 |
|
|
|
20,817 |
|
|
|
5,878 |
|
|
|
14,939 |
|
|
1997
|
Cypress
Place
|
|
|
5,864 |
|
|
|
2,304 |
|
|
|
37 |
|
|
|
7,861 |
|
|
|
415 |
|
|
|
3,671 |
|
|
|
2,341 |
|
|
|
11,947 |
|
|
|
14,288 |
|
|
|
2,698 |
|
|
|
11,590 |
|
|
2000
|
Devonshire
Hills
|
|
|
43,613 |
|
|
|
14,850 |
|
|
|
285 |
|
|
|
32,934 |
|
|
|
2,911 |
|
|
|
5,360 |
|
|
|
15,135 |
|
|
|
41,205 |
|
|
|
56,340 |
|
|
|
7,005 |
|
|
|
49,335 |
|
|
2001
|
Dunfield
Townhomes
|
|
|
13,076 |
|
|
|
1,683 |
|
|
|
- |
|
|
|
30,302 |
|
|
|
- |
|
|
|
45 |
|
|
|
1,683 |
|
|
|
30,347 |
|
|
|
32,030 |
|
|
|
136 |
|
|
|
31,894 |
|
|
2007
|
East
Hill Gardens
|
|
|
- |
|
|
|
231 |
|
|
|
21 |
|
|
|
1,560 |
|
|
|
216 |
|
|
|
1,164 |
|
|
|
252 |
|
|
|
2,940 |
|
|
|
3,192 |
|
|
|
829 |
|
|
|
2,363 |
|
|
1998
|
East
Meadow Apartments
|
|
|
7,140 |
|
|
|
2,250 |
|
|
|
76 |
|
|
|
10,803 |
|
|
|
757 |
|
|
|
1,530 |
|
|
|
2,326 |
|
|
|
13,090 |
|
|
|
15,416 |
|
|
|
2,494 |
|
|
|
12,922 |
|
|
2000
|
East
Winds Apartments
|
|
|
6,415 |
|
|
|
960 |
|
|
|
35 |
|
|
|
5,079 |
|
|
|
360 |
|
|
|
2,711 |
|
|
|
995 |
|
|
|
8,150 |
|
|
|
9,145 |
|
|
|
1,821 |
|
|
|
7,324 |
|
|
2000
|
Elmwood
Terrace
|
|
|
20,666 |
|
|
|
6,048 |
|
|
|
134 |
|
|
|
14,680 |
|
|
|
1,390 |
|
|
|
8,910 |
|
|
|
6,182 |
|
|
|
24,980 |
|
|
|
31,162 |
|
|
|
5,016 |
|
|
|
26,146 |
|
|
2000
|
Falcon
Crest Townhomes
|
|
|
19,016 |
|
|
|
2,772 |
|
|
|
139 |
|
|
|
11,116 |
|
|
|
1,420 |
|
|
|
7,952 |
|
|
|
2,911 |
|
|
|
20,488 |
|
|
|
23,399 |
|
|
|
4,961 |
|
|
|
18,438 |
|
|
1999
|
Falkland
Chase Apartments
|
|
|
38,285 |
|
|
|
9,000 |
|
|
|
288 |
|
|
|
49,705 |
|
|
|
2,688 |
|
|
|
4,187 |
|
|
|
9,288 |
|
|
|
56,580 |
|
|
|
65,868 |
|
|
|
6,247 |
|
|
|
59,621 |
|
|
2003
|
Fox
Hall Apartments
|
|
|
47,000 |
|
|
|
9,959 |
|
|
|
- |
|
|
|
51,874 |
|
|
|
- |
|
|
|
1,180 |
|
|
|
9,959 |
|
|
|
53,054 |
|
|
|
63,013 |
|
|
|
1,207 |
|
|
|
61,806 |
|
|
2007
|
Gardencrest
Apartments
|
|
|
- |
|
|
|
24,674 |
|
|
|
452 |
|
|
|
61,525 |
|
|
|
4,533 |
|
|
|
17,487 |
|
|
|
25,126 |
|
|
|
83,545 |
|
|
|
108,671 |
|
|
|
12,857 |
|
|
|
95,814 |
|
|
2002
|
Gateway
Village Apartments
|
|
|
6,759 |
|
|
|
1,320 |
|
|
|
62 |
|
|
|
6,621 |
|
|
|
619 |
|
|
|
2,100 |
|
|
|
1,382 |
|
|
|
9,340 |
|
|
|
10,722 |
|
|
|
2,149 |
|
|
|
8,573 |
|
|
1999
|
Glen
Brook Apartments
|
|
|
- |
|
|
|
1,414 |
|
|
|
39 |
|
|
|
4,816 |
|
|
|
400 |
|
|
|
2,728 |
|
|
|
1,453 |
|
|
|
7,944 |
|
|
|
9,397 |
|
|
|
1,976 |
|
|
|
7,421 |
|
|
1999
|
Glen
Manor Apartments
|
|
|
5,686 |
|
|
|
1,044 |
|
|
|
38 |
|
|
|
4,564 |
|
|
|
388 |
|
|
|
2,399 |
|
|
|
1,082 |
|
|
|
7,351 |
|
|
|
8,433 |
|
|
|
2,099 |
|
|
|
6,334 |
|
|
1997
|
Golf
Club Apartments
|
|
|
15,041 |
|
|
|
3,990 |
|
|
|
161 |
|
|
|
21,236 |
|
|
|
1,625 |
|
|
|
11,722 |
|
|
|
4,151 |
|
|
|
34,583 |
|
|
|
38,734 |
|
|
|
8,170 |
|
|
|
30,564 |
|
|
2000
|
Hackensack
Gardens
|
|
|
9,139 |
|
|
|
2,376 |
|
|
|
41 |
|
|
|
10,916 |
|
|
|
357 |
|
|
|
3,070 |
|
|
|
2,417 |
|
|
|
14,343 |
|
|
|
16,760 |
|
|
|
1,207 |
|
|
|
15,553 |
|
|
2005
|
Hawthorne
Court
|
|
|
36,582 |
|
|
|
8,940 |
|
|
|
235 |
|
|
|
23,447 |
|
|
|
2,316 |
|
|
|
15,154 |
|
|
|
9,175 |
|
|
|
40,917 |
|
|
|
50,092 |
|
|
|
7,053 |
|
|
|
43,039 |
|
|
2002
|
Heritage
Square
|
|
|
6,179 |
|
|
|
2,000 |
|
|
|
52 |
|
|
|
4,805 |
|
|
|
515 |
|
|
|
2,015 |
|
|
|
2,052 |
|
|
|
7,335 |
|
|
|
9,387 |
|
|
|
1,193 |
|
|
|
8,194 |
|
|
2002
|
Heritage
Woods Apartments
|
|
|
5,046 |
|
|
|
1,640 |
|
|
|
- |
|
|
|
12,455 |
|
|
|
- |
|
|
|
684 |
|
|
|
1,640 |
|
|
|
13,139 |
|
|
|
14,779 |
|
|
|
437 |
|
|
|
14,342 |
|
|
2006
|
Highland
House
|
|
|
6,402 |
|
|
|
3,414 |
|
|
|
- |
|
|
|
14,761 |
|
|
|
- |
|
|
|
418 |
|
|
|
3,414 |
|
|
|
15,179 |
|
|
|
18,593 |
|
|
|
667 |
|
|
|
17,926 |
|
|
2006
|
Hill
Brook Place Apartments
|
|
|
10,978 |
|
|
|
2,192 |
|
|
|
72 |
|
|
|
9,118 |
|
|
|
746 |
|
|
|
5,474 |
|
|
|
2,264 |
|
|
|
15,338 |
|
|
|
17,602 |
|
|
|
3,491 |
|
|
|
14,111 |
|
|
1999
|
Holiday
Square
|
|
|
- |
|
|
|
3,575 |
|
|
|
68 |
|
|
|
6,109 |
|
|
|
656 |
|
|
|
1,409 |
|
|
|
3,643 |
|
|
|
8,174 |
|
|
|
11,817 |
|
|
|
1,224 |
|
|
|
10,593 |
|
|
2002
|
Home
Properties of Bryn Mawr
|
|
|
14,953 |
|
|
|
3,160 |
|
|
|
134 |
|
|
|
17,907 |
|
|
|
1,372 |
|
|
|
9,581 |
|
|
|
3,294 |
|
|
|
28,860 |
|
|
|
32,154 |
|
|
|
6,610 |
|
|
|
25,544 |
|
|
2000
|
Home
Properties of Devon
|
|
|
28,892 |
|
|
|
6,280 |
|
|
|
285 |
|
|
|
35,545 |
|
|
|
2,900 |
|
|
|
21,206 |
|
|
|
6,565 |
|
|
|
59,651 |
|
|
|
66,216 |
|
|
|
13,603 |
|
|
|
52,613 |
|
|
2000
|
Home
Properties of Newark
|
|
|
3,000 |
|
|
|
2,592 |
|
|
|
121 |
|
|
|
12,713 |
|
|
|
1,219 |
|
|
|
12,579 |
|
|
|
2,713 |
|
|
|
26,511 |
|
|
|
29,224 |
|
|
|
6,909 |
|
|
|
22,315 |
|
|
1999
|
Jacob
Ford Village
|
|
|
- |
|
|
|
6,750 |
|
|
|
- |
|
|
|
20,022 |
|
|
|
- |
|
|
|
1,431 |
|
|
|
6,750 |
|
|
|
21,453 |
|
|
|
28,203 |
|
|
|
541 |
|
|
|
27,662 |
|
|
2007
|
Lake
Grove Apartments
|
|
|
36,468 |
|
|
|
7,360 |
|
|
|
225 |
|
|
|
11,952 |
|
|
|
2,326 |
|
|
|
13,249 |
|
|
|
7,585 |
|
|
|
27,527 |
|
|
|
35,112 |
|
|
|
9,027 |
|
|
|
26,085 |
|
|
1997
|
Lakeshore
Villa Apartments
|
|
|
4,842 |
|
|
|
573 |
|
|
|
49 |
|
|
|
3,849 |
|
|
|
506 |
|
|
|
4,670 |
|
|
|
622 |
|
|
|
9,025 |
|
|
|
9,647 |
|
|
|
2,961 |
|
|
|
6,686 |
|
|
1996
|
Lakeview
Apartments
|
|
|
8,484 |
|
|
|
636 |
|
|
|
50 |
|
|
|
4,552 |
|
|
|
526 |
|
|
|
3,015 |
|
|
|
686 |
|
|
|
8,093 |
|
|
|
8,779 |
|
|
|
2,321 |
|
|
|
6,458 |
|
|
1998
|
Liberty
Commons
|
|
|
- |
|
|
|
1,330 |
|
|
|
15 |
|
|
|
- |
|
|
|
125 |
|
|
|
13,290 |
|
|
|
1,345 |
|
|
|
13,415 |
|
|
|
14,760 |
|
|
|
1,354 |
|
|
|
13,406 |
|
|
2005
|
Liberty
Place Apartments
|
|
|
6,334 |
|
|
|
2,033 |
|
|
|
- |
|
|
|
13,125 |
|
|
|
- |
|
|
|
1,069 |
|
|
|
2,033 |
|
|
|
14,194 |
|
|
|
16,227 |
|
|
|
563 |
|
|
|
15,664 |
|
|
2006
|
Maple
Tree
|
|
|
- |
|
|
|
840 |
|
|
|
31 |
|
|
|
4,445 |
|
|
|
329 |
|
|
|
2,287 |
|
|
|
871 |
|
|
|
7,061 |
|
|
|
7,932 |
|
|
|
1,550 |
|
|
|
6,382 |
|
|
2000
|
Mid-Island
Apartments
|
|
|
19,913 |
|
|
|
4,160 |
|
|
|
113 |
|
|
|
6,567 |
|
|
|
1,144 |
|
|
|
5,074 |
|
|
|
4,273 |
|
|
|
12,785 |
|
|
|
17,058 |
|
|
|
4,268 |
|
|
|
12,790 |
|
|
1997
|
Mill
Company Gardens
|
|
|
- |
|
|
|
384 |
|
|
|
25 |
|
|
|
1,671 |
|
|
|
258 |
|
|
|
1,112 |
|
|
|
409 |
|
|
|
3,041 |
|
|
|
3,450 |
|
|
|
902 |
|
|
|
2,548 |
|
|
1998
|
Mill
Towne Village
|
|
|
24,239 |
|
|
|
3,840 |
|
|
|
135 |
|
|
|
13,747 |
|
|
|
1,336 |
|
|
|
11,001 |
|
|
|
3,975 |
|
|
|
26,084 |
|
|
|
30,059 |
|
|
|
5,090 |
|
|
|
24,969 |
|
|
2001
|
Morningside
Heights Apartments
|
|
|
16,445 |
|
|
|
6,147 |
|
|
|
353 |
|
|
|
28,699 |
|
|
|
3,564 |
|
|
|
24,953 |
|
|
|
6,500 |
|
|
|
57,216 |
|
|
|
63,716 |
|
|
|
16,706 |
|
|
|
47,010 |
|
|
1998
|
Mount
Vernon Square Apartments
|
|
|
88,449 |
|
|
|
56,300 |
|
|
|
- |
|
|
|
86,923 |
|
|
|
- |
|
|
|
3,439 |
|
|
|
56,300 |
|
|
|
90,362 |
|
|
|
146,662 |
|
|
|
2,658 |
|
|
|
144,004 |
|
|
2006
|
New
Orleans Park Apartments
|
|
|
18,844 |
|
|
|
2,920 |
|
|
|
105 |
|
|
|
13,215 |
|
|
|
1,071 |
|
|
|
9,394 |
|
|
|
3,025 |
|
|
|
23,680 |
|
|
|
26,705 |
|
|
|
6,808 |
|
|
|
19,897 |
|
|
1997&1999
|
Northwood
Apartments
|
|
|
10,675 |
|
|
|
804 |
|
|
|
62 |
|
|
|
14,286 |
|
|
|
535 |
|
|
|
1,657 |
|
|
|
866 |
|
|
|
16,478 |
|
|
|
17,344 |
|
|
|
1,642 |
|
|
|
15,702 |
|
|
2004
|
Oak
Manor Apartments
|
|
|
7,086 |
|
|
|
616 |
|
|
|
61 |
|
|
|
4,111 |
|
|
|
622 |
|
|
|
2,527 |
|
|
|
677 |
|
|
|
7,260 |
|
|
|
7,937 |
|
|
|
2,143 |
|
|
|
5,794 |
|
|
1998
|
Orleans
Village
|
|
|
65,993 |
|
|
|
8,510 |
|
|
|
369 |
|
|
|
58,912 |
|
|
|
3,768 |
|
|
|
17,711 |
|
|
|
8,879 |
|
|
|
80,391 |
|
|
|
89,270 |
|
|
|
16,547 |
|
|
|
72,723 |
|
|
2000
|
Owings
Run Consolidation
|
|
|
43,081 |
|
|
|
5,537 |
|
|
|
219 |
|
|
|
32,622 |
|
|
|
2,249 |
|
|
|
4,592 |
|
|
|
5,756 |
|
|
|
39,463 |
|
|
|
45,219 |
|
|
|
8,654 |
|
|
|
36,565 |
|
|
1999
|
Park
Shirlington Apartments
|
|
|
19,051 |
|
|
|
4,410 |
|
|
|
136 |
|
|
|
10,180 |
|
|
|
1,403 |
|
|
|
7,614 |
|
|
|
4,546 |
|
|
|
19,197 |
|
|
|
23,743 |
|
|
|
6,081 |
|
|
|
17,662 |
|
|
1998
|
Patricia
Apartments
|
|
|
5,135 |
|
|
|
600 |
|
|
|
43 |
|
|
|
4,196 |
|
|
|
448 |
|
|
|
2,883 |
|
|
|
643 |
|
|
|
7,527 |
|
|
|
8,170 |
|
|
|
2,131 |
|
|
|
6,039 |
|
|
1998
|
Peppertree
Farm Apartments
|
|
|
82,467 |
|
|
|
12,571 |
|
|
|
272 |
|
|
|
83,751 |
|
|
|
2,260 |
|
|
|
5,650 |
|
|
|
12,843 |
|
|
|
91,661 |
|
|
|
104,504 |
|
|
|
5,217 |
|
|
|
99,287 |
|
|
2005
|
Pleasant
View Gardens
|
|
|
53,770 |
|
|
|
5,710 |
|
|
|
426 |
|
|
|
47,816 |
|
|
|
4,447 |
|
|
|
20,897 |
|
|
|
6,136 |
|
|
|
73,160 |
|
|
|
79,296 |
|
|
|
20,030 |
|
|
|
59,266 |
|
|
1998
|
Pleasure
Bay Apartments
|
|
|
14,750 |
|
|
|
1,620 |
|
|
|
108 |
|
|
|
6,234 |
|
|
|
1,077 |
|
|
|
7,454 |
|
|
|
1,728 |
|
|
|
14,765 |
|
|
|
16,493 |
|
|
|
3,757 |
|
|
|
12,736 |
|
|
1998
|
Racquet
Club East Apartments
|
|
|
31,186 |
|
|
|
1,868 |
|
|
|
191 |
|
|
|
23,107 |
|
|
|
1,921 |
|
|
|
7,453 |
|
|
|
2,059 |
|
|
|
32,481 |
|
|
|
34,540 |
|
|
|
8,435 |
|
|
|
26,105 |
|
|
1998
|
Racquet
Club South
|
|
|
2,735 |
|
|
|
309 |
|
|
|
31 |
|
|
|
3,891 |
|
|
|
315 |
|
|
|
1,987 |
|
|
|
340 |
|
|
|
6,193 |
|
|
|
6,533 |
|
|
|
1,747 |
|
|
|
4,786 |
|
|
1999
|
Redbank
Village Apartments
|
|
|
15,296 |
|
|
|
2,000 |
|
|
|
144 |
|
|
|
14,030 |
|
|
|
1,518 |
|
|
|
8,777 |
|
|
|
2,144 |
|
|
|
24,325 |
|
|
|
26,469 |
|
|
|
6,471 |
|
|
|
19,998 |
|
|
1998
|
Regency
Club Apartments
|
|
|
25,550 |
|
|
|
2,604 |
|
|
|
177 |
|
|
|
34,825 |
|
|
|
1,531 |
|
|
|
2,959 |
|
|
|
2,781 |
|
|
|
39,315 |
|
|
|
42,096 |
|
|
|
3,521 |
|
|
|
38,575 |
|
|
2004
|
Rider
Terrace
|
|
|
- |
|
|
|
240 |
|
|
|
10 |
|
|
|
1,270 |
|
|
|
99 |
|
|
|
537 |
|
|
|
250 |
|
|
|
1,906 |
|
|
|
2,156 |
|
|
|
402 |
|
|
|
1,754 |
|
|
2000
|
Ridgeview
at Wakefield Valley
|
|
|
- |
|
|
|
2,300 |
|
|
|
60 |
|
|
|
17,107 |
|
|
|
539 |
|
|
|
2,961 |
|
|
|
2,360 |
|
|
|
20,607 |
|
|
|
22,967 |
|
|
|
1,766 |
|
|
|
21,201 |
|
|
2005
|
Ridley
Brook Apartments
|
|
|
9,473 |
|
|
|
1,952 |
|
|
|
63 |
|
|
|
7,719 |
|
|
|
656 |
|
|
|
3,319 |
|
|
|
2,015 |
|
|
|
11,694 |
|
|
|
13,709 |
|
|
|
2,891 |
|
|
|
10,818 |
|
|
1999
|
Royal
Gardens Apartment
|
|
|
47,000 |
|
|
|
5,500 |
|
|
|
223 |
|
|
|
14,067 |
|
|
|
2,315 |
|
|
|
13,537 |
|
|
|
5,723 |
|
|
|
29,919 |
|
|
|
35,642 |
|
|
|
9,812 |
|
|
|
25,830 |
|
|
1997
|
Sayville
Commons
|
|
|
42,048 |
|
|
|
8,005 |
|
|
|
158 |
|
|
|
55,379 |
|
|
|
1,361 |
|
|
|
407 |
|
|
|
8,163 |
|
|
|
57,147 |
|
|
|
65,310 |
|
|
|
3,639 |
|
|
|
61,671 |
|
|
2005
|
Selford
Townhomes
|
|
|
3,960 |
|
|
|
1,224 |
|
|
|
49 |
|
|
|
4,200 |
|
|
|
504 |
|
|
|
2,288 |
|
|
|
1,273 |
|
|
|
6,992 |
|
|
|
8,265 |
|
|
|
1,742 |
|
|
|
6,523 |
|
|
1999
|
Seminary
Hill Apartments
|
|
|
9,900 |
|
|
|
2,960 |
|
|
|
116 |
|
|
|
10,194 |
|
|
|
1,190 |
|
|
|
8,785 |
|
|
|
3,076 |
|
|
|
20,169 |
|
|
|
23,245 |
|
|
|
4,654 |
|
|
|
18,591 |
|
|
1999
|
Seminary
Towers Apartments
|
|
|
53,515 |
|
|
|
5,480 |
|
|
|
252 |
|
|
|
19,348 |
|
|
|
2,545 |
|
|
|
16,879 |
|
|
|
5,732 |
|
|
|
38,772 |
|
|
|
44,504 |
|
|
|
8,776 |
|
|
|
35,728 |
|
|
1999
|
Sherry
Lake Apartments
|
|
|
19,088 |
|
|
|
2,428 |
|
|
|
142 |
|
|
|
15,618 |
|
|
|
1,431 |
|
|
|
8,800 |
|
|
|
2,570 |
|
|
|
25,849 |
|
|
|
28,419 |
|
|
|
6,635 |
|
|
|
21,784 |
|
|
1998
|
Sherwood
Consolidation
|
|
|
7,007 |
|
|
|
3,255 |
|
|
|
88 |
|
|
|
10,735 |
|
|
|
842 |
|
|
|
5,053 |
|
|
|
3,343 |
|
|
|
16,630 |
|
|
|
19,973 |
|
|
|
2,472 |
|
|
|
17,501 |
|
|
2002
|
South
Bay Manor
|
|
|
8,000 |
|
|
|
1,098 |
|
|
|
40 |
|
|
|
1,958 |
|
|
|
398 |
|
|
|
4,481 |
|
|
|
1,138 |
|
|
|
6,837 |
|
|
|
7,975 |
|
|
|
1,503 |
|
|
|
6,472 |
|
|
2000
|
Southern
Meadows
|
|
|
- |
|
|
|
9,040 |
|
|
|
312 |
|
|
|
31,874 |
|
|
|
3,145 |
|
|
|
6,132 |
|
|
|
9,352 |
|
|
|
41,151 |
|
|
|
50,503 |
|
|
|
7,188 |
|
|
|
43,315 |
|
|
2001
|
Stone
Ends Apartments
|
|
|
22,368 |
|
|
|
5,600 |
|
|
|
147 |
|
|
|
28,428 |
|
|
|
1,407 |
|
|
|
1,965 |
|
|
|
5,747 |
|
|
|
31,800 |
|
|
|
37,547 |
|
|
|
4,121 |
|
|
|
33,426 |
|
|
2003
|
Stratford
Greens Associates
|
|
|
32,608 |
|
|
|
12,565 |
|
|
|
227 |
|
|
|
33,779 |
|
|
|
2,334 |
|
|
|
7,098 |
|
|
|
12,792 |
|
|
|
43,211 |
|
|
|
56,003 |
|
|
|
6,483 |
|
|
|
49,520 |
|
|
2002
|
Sunset
Gardens Apartments
|
|
|
8,429 |
|
|
|
696 |
|
|
|
67 |
|
|
|
4,663 |
|
|
|
684 |
|
|
|
4,693 |
|
|
|
763 |
|
|
|
10,040 |
|
|
|
10,803 |
|
|
|
3,247 |
|
|
|
7,556 |
|
|
1996
|
Tamarron
Apartments
|
|
|
5,200 |
|
|
|
1,320 |
|
|
|
79 |
|
|
|
8,474 |
|
|
|
794 |
|
|
|
1,818 |
|
|
|
1,399 |
|
|
|
11,086 |
|
|
|
12,485 |
|
|
|
2,450 |
|
|
|
10,035 |
|
|
1999
|
Terry
Apartments
|
|
|
- |
|
|
|
650 |
|
|
|
22 |
|
|
|
3,439 |
|
|
|
242 |
|
|
|
1,110 |
|
|
|
672 |
|
|
|
4,791 |
|
|
|
5,463 |
|
|
|
947 |
|
|
|
4,516 |
|
|
2000
|
The
Apts at Wellington Trace
|
|
|
25,217 |
|
|
|
3,060 |
|
|
|
148 |
|
|
|
23,904 |
|
|
|
1,263 |
|
|
|
2,670 |
|
|
|
3,208 |
|
|
|
27,837 |
|
|
|
31,045 |
|
|
|
2,686 |
|
|
|
28,359 |
|
|
2004
|
The
Brooke at Peachtree
|
|
|
- |
|
|
|
992 |
|
|
|
41 |
|
|
|
15,145 |
|
|
|
356 |
|
|
|
1,355 |
|
|
|
1,033 |
|
|
|
16,856 |
|
|
|
17,889 |
|
|
|
1,088 |
|
|
|
16,801 |
|
|
2005
|
The
Colony
|
|
|
- |
|
|
|
7,830 |
|
|
|
164 |
|
|
|
34,121 |
|
|
|
1,758 |
|
|
|
11,030 |
|
|
|
7,994 |
|
|
|
46,909 |
|
|
|
54,903 |
|
|
|
10,978 |
|
|
|
43,925 |
|
|
1999
|
The
Coves at Chesapeake
|
|
|
- |
|
|
|
8,915 |
|
|
|
- |
|
|
|
57,953 |
|
|
|
- |
|
|
|
2,601 |
|
|
|
8,915 |
|
|
|
60,554 |
|
|
|
69,469 |
|
|
|
1,854 |
|
|
|
67,615 |
|
|
2006
|
The
Hamptons
|
|
|
53,437 |
|
|
|
5,749 |
|
|
|
269 |
|
|
|
50,647 |
|
|
|
2,319 |
|
|
|
6,334 |
|
|
|
6,018 |
|
|
|
59,300 |
|
|
|
65,318 |
|
|
|
5,622 |
|
|
|
59,696 |
|
|
2004
|
The
Heights at Marlborough
|
|
|
28,153 |
|
|
|
6,253 |
|
|
|
- |
|
|
|
44,264 |
|
|
|
- |
|
|
|
739 |
|
|
|
6,253 |
|
|
|
45,003 |
|
|
|
51,256 |
|
|
|
1,562 |
|
|
|
49,694 |
|
|
2006
|
The
Landings
|
|
|
- |
|
|
|
2,459 |
|
|
|
139 |
|
|
|
16,753 |
|
|
|
1,416 |
|
|
|
8,313 |
|
|
|
2,598 |
|
|
|
26,482 |
|
|
|
29,080 |
|
|
|
7,981 |
|
|
|
21,099 |
|
|
1996
|
The
Manor Apartments (MD)
|
|
|
25,724 |
|
|
|
8,700 |
|
|
|
228 |
|
|
|
27,703 |
|
|
|
2,282 |
|
|
|
8,635 |
|
|
|
8,928 |
|
|
|
38,620 |
|
|
|
47,548 |
|
|
|
6,767 |
|
|
|
40,781 |
|
|
2001
|
The
Manor Apartments (VA)
|
|
|
5,600 |
|
|
|
1,386 |
|
|
|
75 |
|
|
|
5,738 |
|
|
|
742 |
|
|
|
4,151 |
|
|
|
1,461 |
|
|
|
10,631 |
|
|
|
12,092 |
|
|
|
3,055 |
|
|
|
9,037 |
|
|
1999
|
The
Meadows at Marlborough
|
|
|
21,016 |
|
|
|
6,598 |
|
|
|
- |
|
|
|
28,736 |
|
|
|
- |
|
|
|
1,213 |
|
|
|
6,598 |
|
|
|
29,949 |
|
|
|
36,547 |
|
|
|
1,043 |
|
|
|
35,504 |
|
|
2006
|
The
New Colonies
|
|
|
19,852 |
|
|
|
1,680 |
|
|
|
128 |
|
|
|
21,350 |
|
|
|
1,356 |
|
|
|
10,069 |
|
|
|
1,808 |
|
|
|
32,775 |
|
|
|
34,583 |
|
|
|
10,263 |
|
|
|
24,320 |
|
|
1998
|
The
Sycamores
|
|
|
- |
|
|
|
4,625 |
|
|
|
120 |
|
|
|
15,725 |
|
|
|
1,146 |
|
|
|
2,011 |
|
|
|
4,745 |
|
|
|
18,882 |
|
|
|
23,627 |
|
|
|
2,596 |
|
|
|
21,031 |
|
|
2002
|
The
Townhomes of Beverly
|
|
|
- |
|
|
|
5,820 |
|
|
|
- |
|
|
|
30,465 |
|
|
|
- |
|
|
|
651 |
|
|
|
5,820 |
|
|
|
31,116 |
|
|
|
36,936 |
|
|
|
747 |
|
|
|
36,189 |
|
|
2007
|
The
Village at Marshfield
|
|
|
23,867 |
|
|
|
3,158 |
|
|
|
119 |
|
|
|
28,351 |
|
|
|
1,030 |
|
|
|
2,056 |
|
|
|
3,277 |
|
|
|
31,437 |
|
|
|
34,714 |
|
|
|
3,185 |
|
|
|
31,529 |
|
|
2004
|
Timbercroft
Consolidation
|
|
|
5,446 |
|
|
|
1,704 |
|
|
|
78 |
|
|
|
6,826 |
|
|
|
771 |
|
|
|
4,253 |
|
|
|
1,782 |
|
|
|
11,850 |
|
|
|
13,632 |
|
|
|
2,634 |
|
|
|
10,998 |
|
|
1999
|
Top
Field
|
|
|
6,245 |
|
|
|
1,635 |
|
|
|
- |
|
|
|
16,684 |
|
|
|
- |
|
|
|
476 |
|
|
|
1,635 |
|
|
|
17,160 |
|
|
|
18,795 |
|
|
|
569 |
|
|
|
18,226 |
|
|
2006
|
Trexler
Park Apartments
|
|
|
10,140 |
|
|
|
2,490 |
|
|
|
99 |
|
|
|
13,802 |
|
|
|
1,012 |
|
|
|
5,751 |
|
|
|
2,589 |
|
|
|
20,565 |
|
|
|
23,154 |
|
|
|
4,648 |
|
|
|
18,506 |
|
|
2000
|
Trexler
Park West
|
|
|
- |
|
|
|
2,684 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,378 |
|
|
|
2,684 |
|
|
|
18,378 |
|
|
|
21,062 |
|
|
|
1,048 |
|
|
|
20,014 |
|
|
2006
|
Valley
View Apartments
|
|
|
5,122 |
|
|
|
1,056 |
|
|
|
40 |
|
|
|
4,960 |
|
|
|
408 |
|
|
|
4,270 |
|
|
|
1,096 |
|
|
|
9,638 |
|
|
|
10,734 |
|
|
|
3,136 |
|
|
|
7,598 |
|
|
1997
|
Village
Square Apartments (PA)
|
|
|
5,013 |
|
|
|
768 |
|
|
|
37 |
|
|
|
3,582 |
|
|
|
369 |
|
|
|
3,575 |
|
|
|
805 |
|
|
|
7,526 |
|
|
|
8,331 |
|
|
|
2,484 |
|
|
|
5,847 |
|
|
1997
|
Village
Square Townhomes Apts.
|
|
|
39,285 |
|
|
|
2,590 |
|
|
|
166 |
|
|
|
13,306 |
|
|
|
1,695 |
|
|
|
7,560 |
|
|
|
2,756 |
|
|
|
22,561 |
|
|
|
25,317 |
|
|
|
4,917 |
|
|
|
20,400 |
|
|
1999
|
Vinings
at Hampton Village
|
|
|
- |
|
|
|
1,772 |
|
|
|
67 |
|
|
|
12,214 |
|
|
|
580 |
|
|
|
1,747 |
|
|
|
1,839 |
|
|
|
14,541 |
|
|
|
16,380 |
|
|
|
1,409 |
|
|
|
14,971 |
|
|
2004
|
Virginia
Village
|
|
|
8,580 |
|
|
|
5,160 |
|
|
|
184 |
|
|
|
21,918 |
|
|
|
1,833 |
|
|
|
7,752 |
|
|
|
5,344 |
|
|
|
31,503 |
|
|
|
36,847 |
|
|
|
6,120 |
|
|
|
30,727 |
|
|
2001
|
Wayne
Village
|
|
|
- |
|
|
|
1,925 |
|
|
|
154 |
|
|
|
12,895 |
|
|
|
1,560 |
|
|
|
6,620 |
|
|
|
2,079 |
|
|
|
21,075 |
|
|
|
23,154 |
|
|
|
5,856 |
|
|
|
17,298 |
|
|
1998
|
West
Springfield Terrace
|
|
|
21,656 |
|
|
|
2,440 |
|
|
|
171 |
|
|
|
31,758 |
|
|
|
1,657 |
|
|
|
2,429 |
|
|
|
2,611 |
|
|
|
35,844 |
|
|
|
38,455 |
|
|
|
4,862 |
|
|
|
33,593 |
|
|
2002
|
Westwood
Village Apts
|
|
|
32,619 |
|
|
|
7,260 |
|
|
|
241 |
|
|
|
22,757 |
|
|
|
2,394 |
|
|
|
8,872 |
|
|
|
7,501 |
|
|
|
34,023 |
|
|
|
41,524 |
|
|
|
5,631 |
|
|
|
35,893 |
|
|
2002
|
Westwoods
|
|
|
3,707 |
|
|
|
1,260 |
|
|
|
- |
|
|
|
2,694 |
|
|
|
- |
|
|
|
38 |
|
|
|
1,260 |
|
|
|
2,732 |
|
|
|
3,992 |
|
|
|
56 |
|
|
|
3,936 |
|
|
2007
|
William
Henry Apartments
|
|
|
22,134 |
|
|
|
4,666 |
|
|
|
162 |
|
|
|
22,220 |
|
|
|
1,632 |
|
|
|
9,206 |
|
|
|
4,828 |
|
|
|
33,058 |
|
|
|
37,886 |
|
|
|
7,202 |
|
|
|
30,684 |
|
|
2000
|
Windsor
Realty Company
|
|
|
4,567 |
|
|
|
402 |
|
|
|
30 |
|
|
|
3,300 |
|
|
|
299 |
|
|
|
1,855 |
|
|
|
432 |
|
|
|
5,454 |
|
|
|
5,886 |
|
|
|
1,581 |
|
|
|
4,305 |
|
|
1998
|
Woodholme
Manor Apartments
|
|
|
3,640 |
|
|
|
1,232 |
|
|
|
53 |
|
|
|
4,599 |
|
|
|
522 |
|
|
|
4,256 |
|
|
|
1,285 |
|
|
|
9,377 |
|
|
|
10,662 |
|
|
|
1,957 |
|
|
|
8,705 |
|
|
2001
|
Woodleaf
Apartments
|
|
|
- |
|
|
|
2,862 |
|
|
|
107 |
|
|
|
17,716 |
|
|
|
911 |
|
|
|
1,765 |
|
|
|
2,969 |
|
|
|
20,392 |
|
|
|
23,361 |
|
|
|
2,107 |
|
|
|
21,254 |
|
|
2004
|
Woodmont
Village Apartments
|
|
|
- |
|
|
|
2,880 |
|
|
|
57 |
|
|
|
5,699 |
|
|
|
566 |
|
|
|
2,141 |
|
|
|
2,937 |
|
|
|
8,406 |
|
|
|
11,343 |
|
|
|
1,391 |
|
|
|
9,952 |
|
|
2002
|
Yorkshire
Village Apartments
|
|
|
- |
|
|
|
1,200 |
|
|
|
24 |
|
|
|
2,016 |
|
|
|
237 |
|
|
|
1,001 |
|
|
|
1,224 |
|
|
|
3,254 |
|
|
|
4,478 |
|
|
|
527 |
|
|
|
3,951 |
|
|
2002
|
Other
Assets (c)
|
|
|
6,014 |
|
|
|
296 |
|
|
|
4 |
|
|
|
5,915 |
|
|
|
(1 |
) |
|
|
77,350 |
|
|
|
300 |
|
|
|
83,264 |
|
|
|
83,564 |
|
|
|
15,027 |
|
|
|
68,537 |
|
|
Various
|
VIE
|
|
|
16,524 |
|
|
|
1,203 |
|
|
|
- |
|
|
|
9,963 |
|
|
|
- |
|
|
|
18,704 |
|
|
|
1,203 |
|
|
|
28,667 |
|
|
|
29,870 |
|
|
|
10,608 |
|
|
|
19,262 |
|
|
1995
|
|
|
$ |
1,986,789 |
|
|
$ |
496,602 |
|
|
$ |
13,518 |
|
|
$ |
2,249,265 |
|
|
$ |
133,831 |
|
|
$ |
786,939 |
|
|
$ |
510,120 |
|
|
$ |
3,170,035 |
|
|
$ |
3,680,155 |
|
|
$ |
543,917 |
|
|
$ |
3,136,238 |
|
|
|
(a) |
See discussin
in Note 2 Real
Estate concerning
exchange of minority interests (OP Units) for
shares. |
(b)
|
The
aggregate cost for Federal Income Tax purposes was approximately
$3,099,230.
|
(c) |
Includes
construction in progress of $54,069 and corporate office assets of
$29,495. |
SCHEDULE
III
HOME
PROPERTIES, INC.
REAL
ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER
31, 2007
(Dollars
in thousands)
Depreciation
and amortization of the Company's investments in buildings and improvements
reflected in the consolidated statements of operations are calculated over the
estimated useful lives of the assets as follows:
Land
improvements
|
3-20
years
|
Buildings
and improvements
|
3-40
years
|
Furniture,
fixtures and equipment
|
5-10
years
|
Computer
software
|
5
years
|
The
changes in total real estate assets are as follows:
|
|
2007
|
|
|
2006
|
|
|
2005(a)
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$ |
3,451,762 |
|
|
$ |
3,385,143 |
|
|
$ |
3,123,901 |
|
New
property acquisition
|
|
|
207,366 |
|
|
|
368,301 |
|
|
|
283,363 |
|
Additions
|
|
|
105,450 |
|
|
|
101,723 |
|
|
|
100,013 |
|
Increase
in real estate associated with the conversion of UPREIT
Units
|
|
|
16,475 |
|
|
|
124,292 |
|
|
|
5,220 |
|
Disposals
of assets held for sale associated with consolidated
affordable
limited partnerships
|
|
|
- |
|
|
|
- |
|
|
|
(50,627 |
) |
Disposals,
retirements and impairments
|
|
|
(100,898 |
) |
|
|
(527,697 |
) |
|
|
(76,727 |
) |
Balance,
end of year
|
|
$ |
3,680,155 |
|
|
$ |
3,451,762 |
|
|
$ |
3,385,143 |
|
The
changes in accumulated depreciation are as follows:
|
|
2007
|
|
|
2006
|
|
|
2005(a)
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$ |
450,129 |
|
|
$ |
500,592 |
|
|
$ |
405,919 |
|
Properties
previously held for sale, changed to held and used
|
|
|
- |
|
|
|
- |
|
|
|
6,999 |
|
Depreciation
for the year
|
|
|
110,200 |
|
|
|
99,694 |
|
|
|
99,322 |
|
Disposals
and retirements
|
|
|
(16,412 |
) |
|
|
(150,157 |
) |
|
|
(11,648 |
) |
Balance,
end of year
|
|
$ |
543,917 |
|
|
$ |
450,129 |
|
|
$ |
500,592 |
|
(a)
|
$54,433
of accumulated depreciation was included in assets held for sale as of
December 31, 2005.
|
HOME
PROPERTIES, INC.
FORM
10-K
For
Fiscal Year Ended December 31, 2007
Exhibit
Index
Exhibit
|
|
|
Number
|
Exhibit
|
Location
|
1.0
|
Underwriting
Agreement, dated May 9, 2006, between Home Properties, Inc., UBS
Securities LLC and the selling shareholders named therein
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. on May 10,
2006
|
2.1
|
Agreement
among Home Properties of New York, Inc. and Philip J. Solondz, Daniel
Solondz and Julia Weinstein Relating to Royal Gardens I, together with
Amendment No. 1
|
Incorporated
by reference to the Form 8- K filed by Home Properties of New York, Inc.
dated 6/6/97 (the "6/6/97 8-K")
|
2.2
|
Agreement
among Home Properties of New York, Inc and Philip Solondz and Daniel
Solondz relating to Royal Gardens II, together with Amendment No.
1
|
Incorporated
by reference to the 6/6/97 8-K
|
2.24
|
Contribution
Agreement dated March 2, 1998 among Home Properties of New York, L.P.,
Braddock Lee Limited Partnership and Tower Construction Group,
LLC
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc.,
dated 3/24/98 (the "3/24/98 8-K")
|
2.25
|
Contribution
Agreement dated March 2, 1998 among Home Properties of New York, L.P.,
Park Shirlington Limited Partnership and Tower Construction Group,
LLC
|
Incorporated
by reference to the 3/24/98 8-K
|
2.27
|
Form
of Contribution Agreement among Home Properties of New York, L.P. and
Strawberry Hill Apartment Company LLLP, Country Village Limited
Partnership, Morningside Six, LLLP, Morningside North Limited Partnership
and Morningside Heights Apartment Company Limited Partnership with
schedule setting forth material details in which documents differ from
form
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc. on
5/22/98 (the "5/22/98 8-K")
|
2.29
|
Form
of Contribution Agreement dated June 7, 1999, relating to the CRC
Portfolio with schedule setting forth material details in which documents
differ from form
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc. on
7/2/99 (the "7/2/99 8-K")
|
2.30
|
Form
of Contribution Agreement relating to the Mid-Atlantic Portfolio with
schedule setting forth material details in which documents differ from
form
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc. on
7/30/99
|
2.31
|
Contribution
Agreement among Home Properties of New York, L.P., Leonard Klorfine,
Ridley Brook Associates and the Greenacres Associates
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc. on
10/5/99 (the "10/5/99 8-K")
|
2.33
|
Contribution
Agreement among Home Properties of New York, L.P., Gateside-Bryn Mawr
Company, L.P., Willgold Company, Gateside-Trexler Company, Gateside-Five
Points Company, Stafford Arms, Gateside-Queensgate Company, Gateside
Malvern Company, King Road Associates and Cottonwood
Associates
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc. on
4/5/00
|
2.34
|
Contribution
Agreement between Old Friends Limited Partnership and Home Properties of
New York, L.P. and Home Properties of New York, Inc., along with
Amendments Number 1 and 2 thereto
|
Incorporated
by reference to the Form 8-K/A filed by Home Properties of New York, Inc.
on 12/5/00 (the "12/5/00 8-K")
|
2.35
|
Contribution
Agreement between Deerfield Woods Venture Limited Partnership and Home
Properties of New York, L.P.
|
Incorporated
by reference to the 12/5/00 8-K/A
|
2.36
|
Contribution
Agreement between Macomb Apartments Limited Partnership and Home
Properties of New York, L.P.
|
Incorporated
by reference to the 12/5/00 8-K/A
|
2.37
|
Contribution
Agreement between Home Properties of New York, L.P. and Elmwood Venture
Limited Partnership
|
Incorporated
by reference to the 12/5/00 8-K/A
|
2.38
|
Sale
Purchase and Escrow Agreement between Bank of America as Trustee and Home
Properties of New York, L.P.
|
Incorporated
by reference to the 12/5/00 8-K/A
|
2.39
|
Contribution
Agreement between Home Properties of New York, L.P., Home Properties of
New York, Inc. and S&S Realty, a New York General Partnership (South
Bay)
|
Incorporated
by reference to the 12/5/00 8-K/A
|
2.40
|
Contribution
Agreement between Hampton Glen Apartments Limited Partnership and Home
Properties of New York, L.P.
|
Incorporated
by reference to the 12/5/00 8-K/A
|
2.41
|
Contribution
Agreement between Home Properties of New York, L.P. and Axtell Road
Limited Partnership
|
Incorporated
by reference to the 12/5/00 8-K/A
|
2.42
|
Contribution
Agreement between Elk Grove Terrace II and III, L.P., Elk Grove Terrace,
L.P. and Home Properties of New York, L.P.
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc. on
1/10/01
|
2.43
|
Agreement
for Purchase and Sale of Interests Southeast Michigan Portfolio, dated
April 26, 2006, together with Second Amendment thereto (First Amendment
superseded)
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. on June 30,
2006
|
3.1
|
Articles
of Amendment and Restatement of Articles of Incorporation of Home
Properties of New York, Inc.
|
Incorporated
by reference to Home Properties of New York, Registration Statement on
Form S-11, File No. 33-78862 (the "S-11 Registration
Statement")
|
3.2
|
Articles
of Amendment of the Articles of Incorporation of Home Properties of New
York, Inc.
|
Incorporated
by reference to the Home Properties of New York, Inc. Registration
Statement on Form S-3 File No. 333-52601 filed May 14, 1998 (the "5/14/98
S-3")
|
3.3
|
Articles
of Amendment of the Articles of Incorporation of Home Properties of New
York, Inc.
|
Incorporated
by reference to 7/2/99 8-K
|
3.9
|
Amended
and Restated By-Laws of Home Properties of New York, Inc. (Revised
12/30/96)
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc.
dated December 23, 1996 (the "12/23/96 8- K")
|
3.10
|
Series
F Cumulative Redeemable Preferred Stock Articles Supplementary to the
Amended and Restated Articles of Incorporation of
Home Properties of New York, Inc.
|
Incorporated
by reference to the Form 8-A12B filed by Home Properties of New York, Inc.
on March 20, 2002
|
3.11
|
Articles
of Amendment of the Articles of Incorporation of Home Properties of New
York, Inc.
|
Incorporated
by reference to the Form 10-Q filed by Home Properties, Inc. for the
quarter ended 3/31/04 (the "3/31/04 10-Q")
|
3.12
|
Amendment
Number One to Home Properties of New York, Inc. Amended and Restated
By-laws
|
Incorporated
by reference to the 3/31/04 10-Q
|
3.13
|
Second
Amended and Restated By-laws of Home Properties, Inc.
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. dated November
2, 2007
|
4.1
|
Form
of certificate representing Shares of Common Stock
|
Incorporated
by reference to the Form 10- K filed by Home Properties of New York, Inc.
for the period ended 12/31/94 (the "12/31/94 10-K")
|
4.2
|
Agreement
of Home Properties of New York, Inc. to file instruments defining the
rights of holders of long-term debt of it or its subsidiaries with the
Commission upon request
|
Incorporated
by reference to the 12/31/94 10-K
|
4.8
|
Amended
and Restated Stock Benefit Plan of Home Properties of New York,
Inc.
|
Incorporated
by reference to the 6/6/97 8-K
|
4.14
|
Directors'
Stock Grant Plan
|
Incorporated
by reference to the 5/22/98 8-K
|
4.16
|
Home
Properties of New York, Inc., Home Properties of New York, L.P. Executive
Retention Plan
|
Incorporated
by reference to the 7/2/99 8-K
|
4.17
|
Home
Properties of New York, Inc. Deferred Bonus
Plan
|
Incorporated
by reference to the 7/2/99 8-K
|
4.23
|
Home
Properties of New York, Inc. Amendment Number One to the Amended and
Restated Stock Benefit Plan
|
Incorporated
by reference to the Form 10-Q of Home Properties of New York, Inc. for the
quarter ended 3/31/00 (the "3/31/00 10-Q")
|
4.26
|
Home
Properties of New York, Inc. Amendment Number Two to the Amended and
Restated Stock Benefit Plan
|
Incorporated
by reference to the Form 10-K filed by Home Properties of New York, Inc.
for the annual period ended 12/31/01 (the "12/31/01
10-K")
|
4.27
|
Amendment
No. One to Home Properties of New York, Inc. Deferred Bonus
Plan
|
Incorporated
by reference to the 12/31/01 10-K
|
4.29
|
Amendment
No. Two to Deferred Bonus Plan
|
Incorporated
by reference to the 12/31/02 10-K
|
4.31
|
Amended
and Restated 2003 Stock Benefit Plan
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. dated May 6,
2005 (the "5/6/05 8-K")
|
4.32
|
Second
Amended and Restated Director Deferred Compensation Plan
|
Incorporated
by reference to the 5/6/05 8-K
|
4.33
|
Seventh
Amended and Restated Dividend Reinvestment and Direct Stock Purchase
Plan
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. on September
28, 2006
|
4.34
|
Indenture,
dated October 24, 2006 between Home Properties, Inc., Home Properties,
L.P. and Wells Fargo Bank, N.A., as trustee including the form of 4.125%
Exchangeable Senior Notes due 2026 of Home Properties, L.P. and the
Guarantee of Home Properties, Inc. with respect thereto
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. on October 25,
2006 (the “10/25/06 8-K”)
|
4.35
|
Registration
Rights Agreement, dated October 24, 2006, between Home Properties, Inc.,
Home Properties, L.P. and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Bear Stearns & co.,
Inc.
|
Incorporated
by reference to the 10/25/06 8-K
|
|
Deferred
Bonus Plan (Amended and Restated as of January 1, 2008)
|
Filed
herewith
|
|
Director
Deferred Compensation Plan (Amended and Restated as of January 1,
2008)
|
Filed
herewith
|
10.1
|
Second
Amended and Restated Agreement Limited Partnership of Home Properties of
New York, L.P.
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc.
dated 9/26/97 (the "9/26/97 8-K")
|
10.2
|
Amendments
No. One through Eight to the Second Amended and Restated Agreement of
Limited Partnership of Home Properties of New York, L.P.
|
Incorporated
by reference to Form 10-K of Home Properties of New York, Inc. for the
period ended 12/31/97 (the "12/31/97 10-K")
|
10.3
|
Articles
of Incorporation of Home Properties Management, Inc.
|
Incorporated
by reference to the S-11 Registration Statement
|
10.4
|
By-Laws
of Home Properties Management, Inc.
|
Incorporated
by reference to S-11 Registration Statement
|
10.5
|
Articles
of Incorporation of Conifer Realty Corporation
|
Incorporated
by reference to 12/31/95 10-K
|
10.6
|
Articles
of Amendment to the Articles of Incorporation of Conifer Realty
Corporation Changing the name to Home Properties Resident Services,
Inc.
|
Incorporated
by reference to the 12/31/00 10-K
|
10.7
|
By-Laws
of Conifer Realty Corporation (now Home Properties Resident Services,
Inc.)
|
Incorporated
by reference to the 12/31/95 10-K
|
10.8
|
Home
Properties Trust Declaration of Trust, dated September 19,
1997
|
Incorporated
by reference to the Form 8-K filed by Home Properties of New York, Inc.
dated 9/26/97 (the "9/26/97 10-K")
|
10.13
|
Indemnification
Agreement between Home Properties of New York, Inc. and certain officers
and directors
|
Incorporated
by reference to the Form 10-Q filed by Home Properties of New York, Inc.
for the quarter ended 6/30/94 (the "6/30/94 10-Q")
|
10.15
|
Indemnification
Agreement between Home Properties of New York, Inc. and Alan L.
Gosule
|
Incorporated
by reference to the Form 10-K filed by Home Properties of New York, Inc.
for the annual period ended 12/31/96 (the 12/31/96
10-K")
|
10.26
|
Amendment
No. Nine to the Second Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
|
Incorporated
by reference to 5/14/98 S-3
|
10.27
|
Master
Credit Facility Agreement by and among Home Properties of New York, Inc.,
Home Properties of New York, L.P., Home Properties WMF I LLC and Home
Properties of New York, L.P. and P-K Partnership doing business as
Patricia Court and Karen Court and WMF Washington Mortgage Corp., dated as
of August 28, 1998
|
Incorporated
by reference to the Home Properties of New York, Inc. Form 10-Q for the
quarter ended 9/30/98 (the "9/30/98 10-Q")
|
10.28
|
First
Amendment to Master Credit Facility Agreement, dated as of December 11,
1998 among Home Properties of New York, Inc., Home Properties of New York,
L.P., Home Properties WMF I LLC and Home Properties of New York, L.P. and
P-K Partnership doing business as Patricia Court and Karen Court and WMF
Washington Mortgage Corp. and Fannie Mae
|
Incorporated
by reference to the Form 10-K filed by Home Properties of New York, Inc.
for the annual period ended 12/31/98 ( the "12/31/98
10-K")
|
10.29
|
Second
Amendment to Master Credit Facility Agreement, dated as of August 30, 1999
among Home Properties of New York, Inc., Home Properties of New York,
L.P., Home Properties WMF I LLC and Home Properties of New York, L.P. and
P-K Partnership doing business as Patricia Court and Karen Court and WMF
Washington Mortgage Corp. and Fannie Mae
|
Incorporated
by reference to the 12/31/99 10-K
|
10.30
|
Amendments
Nos. Ten through Seventeen to the Second Amended and Restated Limited
Partnership Agreement
|
Incorporated
by reference to the 12/31/98 10-K
|
10.31
|
Amendments
Nos. Eighteen through Twenty- Five to the Second Amended and Restated
Limited Partnership Agreement
|
Incorporated
by reference to the Home Properties of New York, Inc. Form 10-Q for the
quarter ended 9/30/99 (the "9/30/99 10-Q")
|
10.32
|
Credit
Agreement, dated 8/23/99 between Home Properties of New York, L.P.,
certain Lenders and Manufacturers and Traders Trust Company as
Administrative Agent
|
Incorporated
by reference to the 9/30/99 10-Q
|
10.33
|
Amendment
No. Twenty-Seven to the Second Amended and Restated Limited Partnership
Agreement
|
Incorporated
by reference to the 12/29/99 S-3
|
10.34
|
Amendments
Nos. Twenty-Six and Twenty-Eight through Thirty to the Second Amended and
Restated Limited Partnership Agreement
|
Incorporated
by reference to the 12/31/99 10-K
|
10.37
|
2000
Stock Benefit Plan
|
Incorporated
by reference to the 12/31/99 10-K
|
10.41
|
Home
Properties of New York, L.P. Amendment Number One to Executive Retention
Plan
|
Incorporated
by reference to the 3/31/00 10-Q
|
10.42
|
Amendments
No. Thirty-One and Thirty-Two to the Second Amended and Restated Limited
Partnership Agreement
|
Incorporated
by reference to the 3/31/00 10-Q
|
10.49
|
Amendment
No. Thirty Three to the Second Amended and Restated Limited Partnership
Agreement
|
Incorporated
by reference to the 12/31/00 10-K
|
10.50
|
Amendment
No. Thirty Five to the Second Amended and Restated Limited Partnership
Agreement
|
Incorporated
by reference to the 12/31/00 10-K
|
10.51
|
Amendment
No. Forty Two to the Second Amended and Restated Limited Partnership
Agreement
|
Incorporated
by reference to the 12/31/00 10-K
|
10.52
|
Amendments
Nos. Thirty Four, Thirty Six through Forty One, Forty Three and Forty Four
to the Second Amended and Restated Limited Partnership
Agreement
|
Incorporated
by reference to the 12/31/00 10-K
|
10.57
|
Amendment
Nos. Forty-Five through Fifty-One to the Second Amendment and Restated
Limited Partnership Agreement
|
Incorporated
by reference to the 12/31/01 10-K
|
10.58
|
Home
Properties of New York, Inc. Amendment No. One to 2000 Stock Benefit
Plan
|
Incorporated
by reference to the 12/31/01 10-K
|
10.59
|
Home
Properties of New York, Inc. Amendment No. Two to 2000 Stock Benefit
Plan
|
Incorporated
by reference to the 12/31/01 10-K
|
10.60
|
Amendment
Nos. Fifty-Two to Fifty-Five to the Second Amended and Restated
Limited Partnership Agreement
|
Incorporated
by reference to the Form 10-Q filed by Home Properties of New York, Inc.
for the quarter ended 9/30/02 (the "9/30/02 10-Q")
|
10.61
|
Amendment
Nos. Fifty-Six to Fifty-Eight to the Second Amended and
Restated Limited Partnership Agreement
|
Incorporated
by reference to the Form 10-K filed by Home Properties of New York, Inc.
for the annual period ended 12/31/02 (the "12/31/02
10-K")
|
10.62
|
Amendment
No. Two to Credit Agreement
|
Incorporated
by reference to the 9/30/02 10Q
|
10.63
|
Purchase
and Sale Agreement, dated as of January 1, 2004 among Home
Properties of New York, L.P., Home Properties Management,
Inc. and Home Leasing, LLC, dated January 1,
2004
|
Incorporated
by reference to the Form 10-K filed by Home Properties, Inc. for the
period ended 12/31/2003 (the "12/31/2003 10-K")
|
10.64
|
Amendment
Nos. Fifty-Nine through Sixty-Seven to the Second Amended and
Restated Limited Partnership Agreement
|
Incorporated
by reference to 12/31/2003 10-K
|
10.65
|
Home
Properties of New York, Inc. Amendment No. Three to 2000 Stock Benefit
Plan
|
Incorporated
by reference to 12/31/2003 10-K
|
10.68
|
Home
Properties of New York, Inc. 2003 Stock Benefit
Plan
|
Incorporated
by reference to Schedule 14A filed by
Home Properties of New York, Inc. on March 28,
2003
|
10.69
|
Amendment
Number Two to Home Properties of New York, Inc. and Home
Properties of New York, L.P. Executive Retention Plan
|
Incorporated
by reference to 12/31/2003 10-K
|
10.70
|
Employment
Agreement, dated as of May 17, 2004, between Home Properties, L.P., Home
Properties, Inc. and Edward J. Pettinella
|
Incorporated
by reference to the 12/31/05 10-K
|
10.71
|
Amendment
Nos. Sixty-Eight through Seventy-Three to the Second Amended and Restated
Limited Partnership Agreement
|
Incorporated
by reference to the 12/31/05 10-K
|
|
Summary
of Non-Employee Director Compensation Effective January 1,
2008
|
Filed
herewith
|
|
Summary
of Named Executive Officers Compensation for 2008
|
Filed
herewith
|
10.74
|
Amendment
No. Three to Credit Agreement, dated April 1, 2004, between Home
Properties, L.P., certain Lenders, and Manufacturers and Traders Trust
Company as Administrative Agent
|
Incorporated
by reference to the 12/31/05 10-K
|
10.76
|
LIBOR
Grid Note, dated November 23, 2004 from Home Properties, L.P. to
Manufacturers and Traders Trust Company
|
Incorporated
by reference to the 12/31/05 10-K
|
10.77
|
Mutual
Release, dated January 24, 2005, given by Home Properties, L.P. and Home
Properties, Inc. and Boston Capital Tax Credit Fund XIV, a Limited
Partnership, Boston Capital Tax Credit Fund XV, a Limited Partnership, and
BCCC, Inc. relating to certain obligations pertaining to Green Meadows and
related Letter Agreement.
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. dated
January 24, 2005
|
10.78
|
Amendment
No. Four to Credit Agreement, dated September 8, 2005 between Home
Properties, L.P., certain Lenders, and Manufacturers and Traders Trust
Company, as Administrative Agent
|
Incorporated
by reference to Form 10-Q filed by Home Properties, Inc. for the quarter
ended 9/30/05 (the "9/30/05 10-Q")
|
10.79
|
Agreement,
dated September 30, 2005, between General Electric Credit Equities, Inc.
and H.P. Knolls I Associates, L.P.
|
Incorporated
by reference to the 9/30/05 10-Q
|
10.80
|
Agreement,
dated September 30, 2005, between General Electric Credit Equities, Inc.
and H.P. Knolls II Associates, L.P.
|
Incorporated
by reference to the 9/30/05 10-Q
|
10.81
|
Amendments
Nos. Seventy-Four to through Seventy-Nine to the Second Amended and
Restated Limited Partnership
|
Incorporated
by reference to the 12/31/05 10-K
|
10.82
|
Amendment
No. Eighty to the Second Amended and Restated Limited Partnership
Agreement
|
Incorporated
by reference to the Form 10-Q filed by Home Properties, Inc. for the
quarter ended 3/31/06
|
10.83
|
Amendment
Nos. Eighty-One and Eighty-Two to the Second Amended and Restated Limited
Partnership Agreement
|
Incorporated
by reference to the Form 10-Q filed by Home Properties, Inc. for the
quarter ended 6/30/06
|
10.84
|
Amendment
Nos. Eighty-Three and Eighty-Four to the Second Amended and Restated
Limited Partnership Agreement
|
Incorporated
by reference to the Form 10-Q filed by Home Properties, Inc. for the
quarter ended 9/30/06
|
10.85
|
Amendment
Nos. Eighty-Five through Eighty-Seven to the Second Amended and Restated
Limited Partnership Agreement
|
Incorporated
by reference to the Form 10-K filed by Home Properties, Inc. for the year
ended 12/31/06 (the “12/31/06 10-K”)
|
10.86
|
Development
Agreement, dated March 27, 2006 between Nelson B. Leenhouts and Home
Properties, Inc.
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. on March 27,
2006
|
10.87
|
Amended
and Restated Employment Agreement, dated November 20, 2006 between Edward
J. Pettinella and Home Properties, Inc.
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. on November
21, 2006
|
10.88
|
Employment
Agreement between Nelson B. Leenhouts and Home Properties,
Inc.
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. on February
16, 2007 (the “2/16/07 8-K”)
|
10.89
|
Second
Amended and Restated Incentive Compensation Plan
|
Incorporated
by reference to the 2/16/07 8-K
|
10.90
|
Articles
of Merger of Home Properties Management, Inc. into Home Properties
Resident Services, Inc.
|
Incorporated
by reference to the 12/31/06 10-K
|
10.91
|
Purchase
Agreement, dated October 18, 2006 between Home Properties, Inc., Home
Properties, L.P. and Merrill Lynch & Co., Merrill Lynch, Pierce Fenner
& Smith and Bear Stearns & Co., Inc.
|
Incorporated
by reference to the Form 8-K filed by Home Properties, Inc. on October 19,
2006
|
10.92
|
Amendment
Nos. Eighty-Eight and Eighty-Nine to the Second Amended and Restated
Limited Partnership Agreement
|
Incorporated
by reference to the Form 10-Q filed by Home Properties, Inc. for the
quarter ended 3/31/07
|
10.93
|
Amendment
Nos. Ninety to the Second Amended and Restated Limited Partnership
Agreement
|
Incorporated
by reference to the Form 10-Q filed by Home Properties, Inc. for the
quarter ended 6/30/07
|
10.94
|
Amendment
Nos. Ninety-One and Ninety-Two to the Second Amended and Restated Limited
Partnership Agreement
|
Incorporated
by reference to the Form 10-Q filed by Home Properties, Inc. for the
quarter ended 9/30/07
|
|
Amendment
Nos. Ninety-Three, Ninety-Four and Ninety-Five to the Second Amended and
Restated Limited Partnership Agreement
|
Filed
herewith
|
|
Computation
of Per Share Earnings Schedule
|
Filed
herewith
|
|
List
of Subsidiaries of Home Properties, Inc.
|
Filed
herewith
|
|
Consent
of PricewaterhouseCoopers LLP
|
Filed
herewith
|
|
Section
302 Certification of Chief Executive Officer
|
Filed
herewith
|
|
Section
302 Certification of Chief Financial Officer
|
Filed
herewith
|
|
Section
906 Certification of Chief Executive Officer
|
Furnished
herewith
|
|
Section
906 Certification of Chief Financial Officer
|
Furnished
herewith
|
|
Additional
Exhibits - Debt Summary Schedule
|
Filed
herewith
|
Exhibit
31.1
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER
PURSUANT
TO RULE 13a-14 PROMULGATED BY
THE
SECURITIES AND EXCHANGE COMMISSION
(Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002)
I, Edward
J. Pettinella, certify that:
1.
|
I
have reviewed this annual report on Form 10-K of Home Properties,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations, and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f) for the registrant and
have:
|
(a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
(b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
functions):
|
(a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
|
By:
|
/s/ Edward J. Pettinella
|
|
|
Edward
J. Pettinella
|
|
|
President
and Chief Executive Officer
|
|
|
February
29, 2008
|
Exhibit
31.2
CERTIFICATION
OF CHIEF FINANCIAL OFFICER
PURSUANT
TO RULE 13a-14 PROMULGATED BY
THE
SECURITIES AND EXCHANGE COMMISSION
(Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002)
I, David
P. Gardner, certify that:
1.
|
I
have reviewed this annual report on Form 10-K of Home Properties,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations, and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f) for the registrant and
have:
|
(a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
(b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
functions):
|
(a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
|
By:
|
/s/ David P. Gardner
|
|
|
David
P. Gardner
|
|
|
Executive
Vice President and
|
|
|
Chief
Financial Officer
|
|
|
February
29, 2008
|